Corning, Inc. (NYSE:GLW) shares have been a disappointing investment for many investors for the past couple of years. Even though the company has numerous interesting products, and has the good fortune of supplying fast-growing smartphone makers, the stock has drifted lower and seems to be stuck in a low trading range. It is frustrating for investors to watch a stock drift lower and remain at what appears to be chronically undervalued levels. However, there are a number of reasons why patient investors are likely to be rewarded eventually, by taking a buy and hold approach. Here are three reasons investors should consider buying Corning shares for the long-term:
- Corning shares are undervalued when considering a number of valuation metrics. The stock trades at a below-market price-to-earnings ratio of 10 times. When looking at 2013 estimates, the ratio is even lower, at about 8.5 times earnings. The stock even trades below book value, which is $14.07 per share. The average stock in the S&P 500 Index trades for about 13 times earnings, which indicates that Corning shares could be undervalued by 30% or more.
- The stock pays a solid dividend, which was recently increased, and now yields about 2.3%. Since the earnings are over 4 times the size of the dividend payout, there is plenty of room for the company to increase the dividend in the future. Furthermore, Corning has a very strong balance sheet that supports further dividend increases and stock buy backs. The company has about $6.84 billion in cash and just around $3.16 billion in debt.
- Corning is a proven innovator and the company continues to lead in research and development in a number of areas. It created "Gorilla Glass," which is used in many popular touch screen devices such as smartphones and tablets. This glass surface is durable, and scratch-resistant. The company recently announced a flexible glass version of this product, which could open new markets for Corning. The new product is called "Willow Glass" and it is extremely thin, lightweight and bendable. The number of applications that could use this might be much broader than most investors realize at this time, but it already has potential to work with smartphones, televisions, tablets and many other products.
In summary, the solid yield and rising dividend will pay investors to wait, the strong balance sheet is a very positive factor, and Corning's continued focus on research and development are all likely to contribute to future rewards for investors who buy on dips now.
Key Data Points For Corning From Yahoo Finance:
Current Share Price: $13.13
52-Week Range: $11.51 to $18.74
Dividend: 30 cents, which yields 2.3%
2012 Earnings Estimate: $1.36 per share
2013 Earnings Estimate: $1.51 per share
P/E Ratio: about 10 times earnings
Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.