Shares of Corning (NYSE: GLW ) hit a 52-week low yesterday. Let's take a look at how it got here to find out whether there are still cloudy skies ahead.
How it got here
Corning's near-term woes can be blamed on another weak earnings report, which you can read about in an excellent write-up linked here. The stock's spent much of 2012 trading in a narrow range before Wednesday's earnings finally broke a hole through its floor. Its previous reports weren't particularly compelling, as earnings have declined from $811 million in the third quarter of 2011 to $462 million yesterday.
The 52-week low becomes a lot more apparent when you take a look back at the full 52 weeks, of course. Comparing Corning to its industry peers, competitors, and customers also helps to explain its situation with some greater clarity:
GLW Total Return Price data by YCharts.
As I've mentioned several times in the past, Corning's backbone is its LCD TV coverings, sold through its display technologies segment. This segment has been dwindling recently, but major display-glass competitor LG Display (NYSE: LPL ) and TV manufacturing powerhouse Sony (NYSE: SNE ) have suffered greater losses than Corning, with both falling into huge losses over the past two years:
GLW Net Income TTM data by YCharts.
Let's take a deeper look at some of the key numbers behind this sectorwide slide.
What you need to know
With so much red ink in the sector, we'll have to dig down to the lesser-used price to sales ratio to see just how low some of these stocks have sunk:
|
Company
|
P/E Ratio
|
Price to Free Cash Flow
|
Price to Sales
|
Net Margin (TTM)
|
| Corning |
7.9 |
15.9 |
2.2 |
31.9% |
| LG Display |
N/M |
N/M |
0.3 |
(3.1%) |
| Sony |
N/M |
N/M |
0.1 |
(7.0%) |
| Universal Display (Nasdaq: PANL ) |
106.4 |
166.7 |
22.7 |
21.5% |
| Apple (Nasdaq: AAPL ) |
14.0 |
12.8 |
3.8 |
27.0% |
Source: Morningstar.
Thanks to its firm hold on profitability, Corning has resisted the long tailspin that's sent LG Display and Sony to tiny price-to-sales ratios. However, it's still valued much less dearly than either Universal Display, which develops next-gen screen technology, and Apple, which has grown faster than the market's been able to keep up.
Apple and Universal Display are somewhat similar to Corning, but there are obviously a few key differences. Apple relies on a few key products (think Gorilla Glass and LCD panels) to drive its growth, but Apple's brand is a hit with millions around the world, whereas most consumers probably think nothing of the protective glass on their smartphone until it cracks. Universal Display is very reliant on the revival of TV manufacturing, so its slide over the past year may be a worrying sign. If next-gen technology can't save the TV industry, what hope does Corning have to stay on top?
What's next?
Where does Corning go from here? You'll have to ask consumers. Cheap TVs and commoditized smartphones are not going to help this company turn around, but they both seem like inevitable trends. Corning's not the only company protecting the world's screens, and in any competitive commodity battle, margins tend to dwindle over time. Corning's latest glass developments might help, but the company has to move fast to stay ahead of a rapidly changing technological game.
The Motley Fool's CAPS community has given Corning a perfect five-star rating, with a whopping 98% of our CAPS players expecting the company to beat the market going forward.
Interested in tracking this stock as it continues on its path? Add Corning to your watchlist now, for all the news we Fools can find, delivered to your inbox as it happens. If you're still on the hunt for a long-term growth stock, take a look at the Fool's Top Stock for 2012. We've put together an exclusive free report for our readers, with unique insights into one company that could anchor your gains for years. Find out more -- claim your free report today.
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