It's easier said than done to find the companies best positioned to take advantage of the biggest technology trends in today's fast-changing world. And even then, investors need to carefully weigh the merits of either buying shares of more specialized, fast-growing businesses or picking up stock in larger, more diversified technology giants.
Corning is built to survive and thrive
First up, glass technologist Corning has innovated its way through multiple technology revolutions since it was founded way back in 1851 -- that's 166 years ago. So perhaps unsurprisingly, Corning's influence in the tech world runs deep with several business segments that offer everything from specialized glass substrates for LCD displays, to optical fiber for next-generation telecommunications networks, ceramic substrates and filters for the automotive market, laboratory equipment for the life sciences industry, and protective cover glass already found on billions of smartphones and tablet devices.
That said, with its $26 billion market capitalization as of this writing, Corning's growth rates are relatively modest compared with some smaller tech companies like Cirrus. Core sales last quarter climbed roughly 6% year over year to $2.59 billion, while core earnings declined 0.7% to $431 million. But thanks to share repurchases under a strategic capital allocation framework outlined in late 2015, earnings per share simultaneously increased 13.5% to $0.42.
And Corning has no plans to scale back investing in its future or rewarding long-term shareholders. Under that strategic framework, the company intends to return more than $5 billion to shareholders through dividends and share repurchases between now and 2019, on top of the $7.4 billion returned since the framework was put into place. It's also on pace to invest $10 billion toward fostering future growth opportunities through research, development, and engineering between late 2015 and 2019.
Better yet, Corning stock pulled back from all-time highs after the latest quarterly report, when management noted that while the company's optical segment has the potential to grow in the mid-teens percentage range this year, Corning opted for a cautious approach to guidance because sales for the segment are largely driven by large civil-works projects. This can mean chunky sales from quarter to quarter -- something Wall Street hates to see.
But that shouldn't be a concern for patient, long-term investors. So with shares trading at roughly 15 times this year's expected earnings even after a 20% rise over the past year, Corning still looks like a solid buy.
Cirrus Logic: High growth with a specialized niche
Meanwhile, Cirrus Logic is a comparatively small company, with its roughly $3.7 billion market capitalization as of this writing. That's partly a product of its narrower scope, specializing in analog and mixed-signal audio and voice integrated circuits -- think, for example, of the audio and voice processing chips in everything from smartphones to tablets, headsets, wearable devices, and even smart-home applications.
But what Cirrus lacks in size it has made up for in stellar earnings growth from a smaller base. Revenue last quarter climbed nearly 24% year over year to $320.7 million, while adjusted net income per share grew an impressive 84% to $0.81. CEO Jason Rhode also insisted Cirrus is "extremely pleased" with its performance with strong design win activity over the past several months.
"As demand for innovative audio and voice solutions continues to increase across a wide range of end markets," Rhode added, "we believe our diversified product portfolio and roadmap will continue to position us for success for many years to come."
That said, Cirrus' top-line growth isn't exactly smooth in these early stages. Shares have plunged more than 11% over the past month, primarily after the company predicted that revenue in its current quarter would arrive between $390 million and $430 million, all but the top end of which would mark a decline from sales of $429 million in the same year-ago period.
In Cirrus Logic's corresponding shareholder letter for the quarter, however, management explained that the company is anticipating ramping up demand for "certain portable audio products ahead of product launches in the back half of the year" -- likely a reference to Apple's upcoming iPhone 8 launch later this year -- but that the heaviest portion of the ramp-up will occur toward the end of the quarter. As such, Cirrus warned that the timing of any individual order changes "could cause large swings in our revenue for each quarter."
Similar to Corning's guidance, however, this shouldn't be a large concern for long-term Cirrus investors, who can take solace knowing the Cirrus also reiterated its expectation for "modest revenue growth" for its full fiscal year.
In any case, with Cirrus trading at just 11.4 times this year's expected earnings, I think it's a mouthwatering bargain for opportunistic investors.
So which is the better buy today? I think that depends on your goals as an individual investor. If you're looking for relative stability and generous capital returns, Corning is a fantastic bet. But if you can stomach more volatility and are searching for higher growth rates and potentially greater long-term gains, Cirrus is a compelling portfolio candidate.
In the end, I'd be perfectly content to have both Cirrus and Corning in my personal portfolios. But given its low valuation and my personal tolerance for risk, I think Cirrus Logic is the better buy today.
Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Cirrus Logic and Corning. The Motley Fool has a disclosure policy.