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While Corning (GLW) trades at just 8.3x past earnings, the bears still complain about free cash flow uncertainty. In FY2011, the company generated $757M worth of free cash flow. I model this figure increasing to $1.1B in 2017, which Corning currently trades 18.3x at. This certainly makes Corning look expensive, but much of it stems from high capital expenditures, which ate more than 30% of revenue in FY2011.

As I have stated previously, capex plans are often a sort of R&D lite. If you value Corning by operating cash flow, it actually appears to be very cheap. FY2011's operating cash flow represented 15.8% of market value. Gorilla Glass and positive secular trends in end markets is more likely than not to catalyze this metric.

But, it gets better. Qualcomm (QCOM), which is rated closer to a "strong buy" than Corning (source: NASDAQ), currently has operating cash flow representing 4.6% of operating cash flow. Thus, while Corning may be more expensive from a free cash flow right now, capex trends will normalize in the longer-term and boost shareholder value.

TE Connectivity (TEL) is yet another attractive pick in the communications equipment industry. In my DCF model, I make several assumptions: (1) 10.9% per annum growth rate over the next six years, (2) operating metrics stay at historical levels, (3) a 2.5% perpetual growth rate, and (4) a discount rate of 10.5%. Based on these assumptions, I find the fair value of the stock to be $45.70, which is at a 37.4% premium to the end of trading on May 12, 2012. TE Connectivity provides an ideal example of what Corning could look like once it gets capex to normal levels. My model forecasts free cash flow trending from around $1.2B in 2012 to $2B in 2017. That means that 2017 free cash flow is 14.3% of market value. If Corning can get capex down to this level, I estimate that it will be around 28% accretive to shareholder value.

Corning has also delivered stellar execution:

I'm very pleased that in the first quarter, all our other businesses grew sequentially. Specialty Materials sales were up 21%, led by the stronger-than-expected demand for Gorilla Glass. Sales in Environmental were up 12%, also more than anticipated.

We also told you to reach our goal of $10 billion sales by 2014, we would supplement organic growth with acquisitions.

As the company acquires new businesses, it will be able to increase scale and thus spread fixed costs over a wider revenue bases. In essence, this will cause capex to become less of a headwind to value creation over the long-term.

Despite this impressive momentum and growth story, analysts are still more bullish on Qualcomm and TE Connectivity. Consensus estimates for the latter's EPS forecast that i will decline by 5.1% to $2.96 in 2012 and then grow by 18.9% and 8.5% in the following two years. Assuming a multiple of 13x and a conservative 2013 EPS of $3.48, the stock would hit $45.24 for 36% upside. This is on top of a decent dividend yield of 2.1%. No wonder then why the stock is rated a "strong buy".

Consensus estimates for Qualcomm's EPS forecast that it will grow by 17.5% to $3.76 in 2012 and then by 11.4% and 11.7% in the following two years. Assuming a multiple of 13x and a conservative 2013 EPS of $4.14, the stock would fall by 13%. By contrast, if Corning trades at 13x a conservative 2013 EPS estimate of $1.47, the stock would explode by 43.6% upside.

Source: Corning, TE Connectivity Stocks Looking Hotter Than Qualcomm