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Corning Incorporated: Is GLW a Great Stock for Value Investors?

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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn't want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let's put Corning IncorporatedGLW stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock's current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Corning Incorporated has a trailing twelve months PE ratio of 16.99, as you can see in the chart below:

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.11. If we focus on the long-term PE trend, Corning Incorporated's current PE level puts it above its midpoint of 13.20 over the past five years, with the number having risen rapidly over the past few months.

Further, the stock's PE also compares favorably with the Zacks classified Telecommunications Equipment sector's trailing twelve months PE ratio, which stands at 18.59. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Corning Incorporated has a forward PE ratio (price relative to this year's earnings) of 16.01, so it is fair to say that a slightly more value-oriented path may be ahead for Corning Incorporated stock in the near term too.

P/CF Ratio

An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn't take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company's management and (b) are less affected by variation in accounting policies between different companies.

The ratio is generally applied to find out whether a company's stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.

In this case, Corning Incorporated's P/CF ratio of 5.82 is lower than the Zacks categorized Communications Components industry average of 6.97, which indicates that the stock is somewhat undervalued in this respect.

Broad Value Outlook

In aggregate, Corning Incorporated currently has a Zacks Value Style Score of 'A', putting it into the top 20% of all stocks we cover from this look. This makes Corning Incorporated a solid choice for value investors.

What About the Stock Overall?

While Corning Incorporated might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of 'C' and a Momentum score of 'A'. This gives GLW a Zacks VGM score-or its overarching fundamental grade-of 'A'. (You can read more about the Zacks Style Scores here >> )

Notably, the company's recent earnings estimates have been quite encouraging. The current quarter has seen four estimates go higher in the past sixty days compared to just one lower, while the full year estimate has seen six up and two down in the same time period.

This has had a meaningful impact on the consensus estimate, as the current quarter consensus estimate has risen by 2.9% in the past two months, while the full year estimate has increased by 4.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Corning Incorporated Price and Consensus

Corning Incorporated Price and Consensus | Corning Incorporated Quote

However, this positive trend has likely not yet been reflected in the stock, as we have just a Zacks Rank #3 (Hold), which indicates expectations of in-line performance in the near term. Nonetheless, the definite bullish analyst sentiment indicates that the stock's growth story is intact.

Bottom Line

Corning Incorporated is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite having a Zacks Rank #3, the stock belongs to an industry which is ranked among the Top 33%, which indicates that broader factors are favorable for the company. Further, over the past one year, the Zacks categorized Communications Components industry's performance has outperformed the broader market, as you can see below:

So, it might pay for value investors to delve deeper into the company's prospects, as fundamentals indicate that this stock could be a compelling pick.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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