Everything is about wireless gadgetry now. Smart phones and tablets are taking over the entire world, and that makes companies tied to it red-hot. At least, that was the case. There might be a lot of people upset over Apple’s decline, but the universe expands beyond one company. Despite the hype not all stocks benefited, even during the good days. Corning (NYSE: GLW) has not moved as much as market presence would suggest. The maker of Gorilla glass has some obsession with the $12s. Fret not, for I am here again to illuminate the path ahead.
Corning has Not Moved
Sure it might not be the best feature of Corning that it is incurably in love with the $12 area. However, there is much to be said for not declining in the interim. Good news rests in the rise of the book value per share over time. The current book value per share is $14.57 almost $2 above the current price. The last time that Corning traded with book was at the beginning of 2011. Since then, the price has gone down to the $12 area, but the book value has continued rising. This is while paying a dividend.
Here you have a company that has been appreciating in underlying value, while still returning some value to shareholders. Corning has a respectable dividend of 2.89%. I see no haphazard acquisitions for Corning that inflate book, which leads one to the conclusion that Corning has been increasing the value of the business organically. I said haphazard, not no acquisitions. It could be that the decline in 2011 was due to the weakening LCD business for Corning. It appears that the market was worried, but the company did better, but not great, despite the weaker LCD business. In my mind, Corning has this pent-up demand, but no one realizes they want and need Corning yet. When they do the stock will rise, and it will be too late for most.
Corning Can Move
Compare all of this to Corning’s competitor TE Connectivity (NYSE: TEL), which sells a lot of electronic and specialty components to various industries. The stock had also been pretty flat in a range of $30-$35. That is a wider range than Corning has had, but for long-term holders the effect is the same. Recently it has begun a rise to beyond $41. The pattern is not done yet, and who knows where it will go. It could inch up day by day, or correct.
TEL has similar features to Corning, but less. It has a smaller market cap, lower 2.07% dividend yield, lower earnings, lower margins, and less cash. Cash deserves some attention, because TEL has less than $1B while Corning has a little over $6B. TEL also has a higher debt-to-equity ratio at 0.37 versus Corning’s 0.16. I am interested in small cell networks and TEL’s recent announcement of a 10Gbps optical transport is interesting, but before I set my heart aflutter I would need to know what companies want to use it.
I think Corning will rise fast, but there is no telling when it will happen. The stock market is on a caffeine-fueled sprint. If it collapses, Corning could see a kneejerk decline, but that would make it a better stock. It stands to reason that even if the stock market collapses due to being inflated and takes Corning’s share price with it, the actual business will not be affected. Corning will still be making sales, generating profits, and paying dividends. You could do worse.
Nothing is Completely Positive
Despite the increase in the book value per share, the PE has stayed fairly flat. Earnings have not been growing along with the business. This means that the company is doing well enough to increase value on the balance sheet, but not well enough to expand its income. Net income TTM is actually in decline, which does not mean losses, but it means less net income on a rolling basis than the quarters being pushed out of the calculation. Corning is a long-term stock. I would not call it undervalued, but there is a solid foundation from which to launch to new heights.
Some People Need Movement
Patience is not for everyone. This market is driving me nuts by having everything make 52-week highs. Corning does not really have any direct competitors in its class. Instead, I decided to go with a cable maker listed as a competitor on YCharts.
Amphenol (NYSE: APH) makes all kinds of cables and associated products. Fiber optics and coaxial cables are part of the company’s portfolio. There is no fancy big banner product like Gorilla Glass. However, the stock has been moving. From the end of 2011 when the price declined to the low $40s, the stock is now at $72. We can talk about how APH is not Corning, but an important difference for investors is that APH moves. It may have moved too much to jump in right now.
Amphenol has a small dividend with a yield of 0.60%, and cash is comparatively light at a bit less than $1B. A debt-to-equity of 0.69 rounds out the basics. The thing about APH is that its net income TTM is on an uptrend, though not a definitive one. Revenue growth and earnings growth is in the double digits on a quarterly YoY basis, which is far better than Corning. Its stock does more for a reason, but will APH with its PE above 20 suffer a decline if growth slows? Even if it misses on the top line once it could damage the share price. For now, it beats.
As a stock that moves Amphenol definitely belongs on your watchlist with Corning. If you wait for a decline due to short-term factors, while the long-term factors remain bullish you could come out on top. GLW is giving you an entry right now. TEL is in the midst of a run, and APH has been moving for over a year.