These stocks may offer better returns than Corning – Trefis
We believe that there are other stocks currently better valued than Corning stock (NYSE: GLW). Corning’s current operating price / earnings ratio (P / EBIT) of 17x is above the levels of 16x for EnerSys (NYSE: ENS), 14x for BWX Technologies (NASDAQ: BWXT) and 9x for Brunswick (NYSE: BC). These stocks have a lower valuation (P / EBIT) than Corning, despite having experienced better revenue and operating income growth in recent years. This disconnect between valuation and performance could mean that investors are better off buying ENS, BWXT and BC stocks versus GLW. Specifically, we come to our conclusion by examining the historical trends in revenue, operating income and P / EBIT of these companies. Our dashboard – Better Bet Than Corning Stock: Pay Less To Get More From ENS, BWXT, BC Stock – has more details – parts of which are summarized below.
1. Income growth
- Corning revenues grew at an average rate of 3.9% over the past two years, compared to an average revenue growth of 5.1% for EnerSys, 8.0% for BWX Technologies and 4.6% for Brunswick.
- However, if we take a look at the revenue growth over the past twelve months, Corning’s revenue growth of 22.8% is much better than the
- In recent quarters, Corning has seen revenue increase due to continued demand for gasoline particulate filters, given increased adoption of emissions regulations in Europe and China.
- However, with chip shortages impacting overall auto production, Corning’s auto business could experience slower growth in the near term.
- Corning’s other businesses, primarily fiber optics, are expected to experience strong demand to support the expansion of 5G for large carriers.
- Note that Brunswick – a water recreation company – has seen its business grow during the pandemic, with boats proving an attractive option for people looking to venture out of their homes and avoid crowded places.
- Going forward, Corning is expected to post more than 22% revenue growth in 2021, better than the expected growth of around 10% for EnerSys and around 1% for BWX Technologies, but lower than the growth of over 33% forecast for Brunswick.
2. Growth in operating income
- Corning operating income growth has averaged -18.2% over the past two years, compared to -6.1% for EnerSys, 8.4% for BWX Technologies and 65% for Brunswick.
- Corning’s negative growth can be largely attributed to falling sales and rising operating costs during the pandemic.
- If we look at the operating margin growth for the past twelve months, Corning’s operating margin growth of 279% is much better than 28% for EnerSys and -7.2% for BWX Technologies, but lower. at 588% for Brunswick.
- Corning’s rise in margins over the past twelve months can be attributed to a rebound in business from lows seen during the pandemic.
- Brunswick has experienced strong revenue growth of 39% so far this year and has been able to raise prices, which has resulted in an increase of over 300 basis points in operating margins in the during the first three quarters of this year.
The net of everything
As we can see over the past two years, EnerSys, BWX Technologies and Brunswick have shown higher revenue growth and operating revenues than Corning. Despite better earnings and revenue growth in recent years, these companies have a comparatively lower P / EBIT. Now, Corning’s financial data has surely improved over the past few quarters, but it is trading at an expensive valuation against the other three companies. Overall, we believe this valuation gap will eventually narrow over time to favor the more attractive group of stocks, including Brunswick.
As well Corning Peer Comparisons summarizes how the company behaves relative to its peers on important metrics.
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