Today, there is a battle brewing in the smartphone and tablet industries. With Apple's (NASDAQ:AAPL) iPhone and iPad controlling huge portions of these markets, it has been an uphill battle for other companies to break into the market. Yet slowly but surely, Samsung, LG (LG) and others are beginning to chip away at Apple's market share, and as a result, many investors are looking for a company to bet on, but are unsure where to start. For many, Samsung sticks out as a great choice, but another company, Corning (NYSE:GLW), is likely an even better choice; it provides the technology for the tough but ultra-thin scratch-resistant glass that is necessary for the everyday wear and tear that our smartphones, and tablets need to endure.
Corning is a tech company specializing in glass and ceramics, most recognized for its Gorilla Glass. At the center of their current business model is the retail consumer electronics industry making its stock price very closely tied to the industry. Just some of its users include Samsung, Sony (NYSE:SNE), HTC, LG, Dell (NASDAQ:DELL), and HP (NYSE:HPQ). With so many companies using Gorilla Glass, GLW is a great way to invest in the smartphone and tablet battles without having to choose a single phone or tablet manufacturer.
Within the last year, GLW has been between 10 and 16, reaching its high point on 11/15/2011 and the low point just last 8/1/2012. It has P/E ratio of 9.07x and an EPS of 1.431, which compares pretty well versus its peers, according to Reuters. Yet one of the most exciting part of its financials is an annual dividend yield of around 2.80%.
With a Quick ratio of 4.43x and a current ratio of 4.96x, the company looks to be in great financial condition, with enough cash to cover any necessary expenses (these two ratios measure a company's ability to pay its short term debt with its liquid assets and values this high usually means good things since the company won't need to make too many high interest short-term loans). The company could do a little more leveraging considering its .15x Debt/Equity ratio, as a healthy amount of debt is sometimes necessary in order to fuel growth. With a gross margin of 43.83% and an EBITDA margin of 31.26%, the profitability of the company also looks stellar. Management effectiveness is also great with a return on assets of 7.87% and a return on equity of 10.45%. The only real downside at the moment is the negative EPS growth rate of -31.9% and the low asset turnover of 0.28%. Earnings numbers for GLW have gone down since 2010 and 2011, which can be considered one of the determinants for the lowered valuation of the company for those years. With a little more aggressiveness in terms of overall company growth and sales (which have been on an uptrend recently), we could easily see a turnaround in 2013.
We know that the company has good grounding as far as financial strength goes. And considering the profitability of the company, we know that Corning can afford to maintain, and even increase, research and development expenditures in order to develop its products further. It will be interesting to see the result's of GLW's earnings, with will be released in a few days, on October 24.
The Corning's Gorilla Glass is a great product, and has spread itself well across the electronics industry, and there is plenty of money to be made in consumer electronics, as the tablet wars heat up and companies try to make advances on the iPhone's market share. While GLW's stock may have dipped below its past highs, this could prove to be a great buying opportunity. Overall, Corning looks like a good buy for the long term, and for those with reservations, the strong dividend can hopefully alleviate some concerns
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article was written by an analyst at Catalyst Investments.