Corning (NYSE:GLW) – Is it worth buying at current price (A Valuation)

I had mentioned before Corning (NYSE:GLW), a stock I owned. 

The reason why I own this stock is because my evaluation of its valuation shows that it is under-valued. 

The valuation method I normally use is the “Discounted Free Cash Flow” (DCF) modelling method, which I believe works well. 

The last traded price of GLW is US$23.85. 

The latest Earnings per share (EPS) of GLW is US$1.34, and dividend per share (DPS) is US$0.34. 

At a glance, the various ratios are as follow:

Price / Book = 1.57.

Price / Sales = 3.30.

Price / Earnings = 17.8.

Based on Analysts estimate of average EPS growth over next few years (I assume 10% for next 10 years), and a discount rate of 10%, and assuming growth rate dropped to inflation rate of about 2% after 10 years, I obtained an intrinsic value of US$30.49, which implies a margin of safety of 21.8% based on last traded price. 

I tried to double-check with Benjamin Graham’s valuation method, which gives me an intrinsic valuation of US$36.14, or a margin of safety of 34%. 

Given the above, I believe current price of US$23.85 is still a good deal.  

Corning (NYSE:GLW) Q3 sales and earnings beat estimates

In October 2014, Corning (NYSE stock symbol: GLW) announced its results for the third quarter of 2014.  It reported third-quarter revenue of $2.54 billion, an increase of 22.9 percent from the year-ago quarter. Also, core EPS grows 21%; and sales and earnings exceed expectations. 

Third-Quarter Highlights

• Core sales were $2.6 billion, a 26% increase on a year-over-year basis. Net sales (GAAP) were $2.5 billion, a 23% increase on a year-over-year basis.
• Core earnings per share were $0.40*, a 21% improvement over a year ago. This marked the eighth consecutive quarter of year-over-year core EPS growth. GAAP earnings per share were $0.72.
• Corning’s LCD glass volume was up by high single digits sequentially, driven by retail sales of TVs and supply chain preparations for the upcoming holiday season.
• Year-over-year core sales in Corning Environmental Technologies grew significantly at 25%, and core sales in the Optical Communications segment remained robust, growing 7%.

GLW earnings announcement for shareholders contain the following statements:

1) "We continue to work on a major initiative for our Life Sciences business, which we believe could become a large opportunity for us.".

2) "Gorilla Glass is receiving interest from the automotive industry for solutions that may reduce overall vehicle weight, improve gas mileage, and provide additional safety benefits. These new technologies may serve as the foundation for Corning's next growth surge".

3) "And with the anticipated conclusion of the current repurchase program this quarter, the board of directors has agreed to accelerate its evaluation of future share repurchases and dividend increases."

It had also recently been announced that Apple did not use Sapphire glass (from GTAT) for Apple iPhone 6.  GTAT's Sapphire glass is a direct competitor for Corning's flagship product, Gorilla Glass. 

Traditionally, iPhones have shipped with Corning’s Gorilla Glass as its protective cover glass. However, because of Apple‘s deal with GT Advanced Technologies, a manufacturer of sapphire crystal products and manufacturing equipment, there were rumors that the iPhone 6 would have a sapphire cover instead of Gorilla Glass.

While Apple has not explicitly mentioned the use of Corning’s Gorilla Glass on iPhone 6 or the iPhone 6 Plus, there have been indications that the iPhone 6 might have Gorilla Glass protecting its display.
The Likelihood Of Gorilla Glass On iPhone 6 Bodes Well For Corning.  The fact that Saphhire glass is unable to replace Gorilla Glass is great news for Corning and their shareholders.  

Introducing Corning (GLW)

Corning is a rather strange company - strange in that most of the people in the world are using their products, and yet most have never heard of "Corning"! 

Regardless of whether you are using an iPhone, an iPad, a Samsung smartphone, or Samsung tablet, all uses a Corning product, called Gorilla Glass.  Corning basically has a big chunk of the market in the glasses for smartphones and tablets!  Not only that, it also has a growing optical fibre networking and life science business.  

Company Profile:
Corning Incorporated (US stock quote GLW) manufactures and sells specialty glasses, ceramics, and related materials worldwide. The company operates through five segments: Display Technologies, Optical Communications, Environmental Technologies, Specialty Materials, and Life Sciences. The Display Technologies segment manufactures glass substrates for active matrix liquid crystal displays (LCDs) that are used primarily in notebook computers, flat panel desktop monitors, and LCD televisions. The Optical Communications segment manufactures optical fiber and cable, and hardware and equipment products comprising cable assemblies, fiber optic hardware and connectors, optical components and couplers, closures, network interface devices, and other accessories. The Environmental Technologies segment manufactures ceramic substrates and filter products for emissions control in mobile and stationary, and gasoline and diesel applications. The Specialty Materials segment manufactures products that provide approximately 150 material formulations for glass, glass ceramics, and fluoride crystals. The Life Sciences segment develops, manufactures, and supplies scientific laboratory products, such as general labware and equipment, as well as specialty surfaces, media, and reagents for cell culture research, bioprocessing, genomics, drug discovery, microbiology, and chemistry. This segment also develops and produces various technologies, including the Corning Epic technology for screening; the Corning HYPER platform of vessels for cell yields; Corning Microcarriers for cell scale-up, therapy, and vaccine applications; Corning CellBIND, Matrigel, BioCoat, and Synthemax II surfaces; and Corning stemgro media. Corning Incorporated has strategic collaboration agreement with World Kitchen, LLC.

Financials & Outlook:
Last traded = US$20.92
Market Capital = US$27.02
Current P/E = 23.18
P/S = 3.03
Dividend Yield = 1.94%
Beta = 1.63
Debt/Equity    = 0.19
P/B    = 1.38
P/Cash = 4.52
P/FCF = 10.15
ROE    = 6.1%
Profit Margin = 14.3%
Div Payout ratio = 44.4%

The technicals show strong support at about US$14 (BUT doesn't mean the stock will fall to this price).