May 20, 2012 in Business

Motley Fool: Corning appears poised to ride Gorilla Glass wave

Universal Uclick
 
Associated Press photo

A model demonstrates the flexibility of Corning’s Gorilla Glass.
(Full-size photo)

Glass and ceramics giant Corning (NYSE: GLW) is poised to profit.

In Corning’s first-quarter earnings report, its display technologies division (its largest segment by sales) saw revenue fall 11 percent year over year amid rapidly declining pricing. But sales of fiber-optic cables to the telecom industry jumped 7 percent, while sales of the more-advanced specialty glass segment that includes Gorilla Glass soared 13 percent. All in all, the company reported a 2 percent year-over-year revenue boost, better than what many analysts expected.

The premium Gorilla Glass product will drive growth throughout 2012, with its strong but thin and light panels covering the screens of several Apple products, from the iPhone to the iPad, as well as high-end Androids from Samsung and Motorola Mobility. Sales for high-end smart devices are absolutely exploding and look like they should continue to climb for years to come – with Corning poised to ride their coattails.

(The Motley Fool owns shares of Corning and Apple and its newsletters have recommended them.)

Ask the Fool

Q: You recently explained buying stocks through a brokerage account, but you didn’t mention that folks may also be able to buy shares directly from the companies themselves. Right? – D.L., via email

A: Right. Brokerages are not the only option. You can hold a lot of stock through mutual funds in your 401(k), for example. And as you noted, with many companies you can buy stock directly from them, through direct stock purchase plans, dividend reinvestment plans (sometimes referred to as “Drips”), and the like. These plans often let you buy small chunks of stock, for small sums, and charge low or no fees. Learn more at fool.com/School/DRIPs.htm, dripinvesting.org, and dripinvestor.com.

Q: What is a stock’s “multiple”? – H.W., Tallahassee, Fla.

A: “Multiple” usually just refers to a stock’s price-to-earnings ratio (or P/E). You get a multiple by dividing a stock’s price by something, such as earnings (via the P/E ratio) or revenues (via a price-to-sales ratio).

Imagine Home Surgery Kits (ticker: OUCH), a company trading at $30 per share. It earned $2 per share over the past year, so its P/E is 15 (30 divided by 2 equals 15). You might refer to it as trading at an earnings multiple of 15.

If you read analyses of various companies, you’ll see references to price-to-sales multiples, book-value multiples, cash-flow multiples and more. It’s instructive to compare a company’s various multiples with those of its peers to see whether its stock appears to be undervalued or overvalued.

FedEx, for example (a Motley Fool Stock Advisor recommendation), recently sported a P/E of 14, while United Parcel Service’s was 20. That suggests that FedEx is the better bargain, though ideally you’d want to assess other numbers as well.

My dumbest investment

I do believe that Under Armour’s stock was – and is, to date – my dumbest investment! – Dwayne, online

The Fool responds: Under Armour has given its long-term investors quite a ride, topping $60 in 2007, plunging below $20 in 2009 and then touching $100 this year. Depending on when shareholders got in and out, they may be quite happy or despondent. The sports apparel company has a market cap near $5 billion and a recent price-to-earnings (P/E) near 53, well above its five-year average P/E of 36. That suggests that the stock may have gotten ahead of itself again.

On the plus side, its revenue and earnings have been growing at double-digit rates and accelerating, and it’s adding outlet stores aggressively. It doesn’t have the fattest profit margins in its industry, though, and its stock price doesn’t seem to be a screaming bargain right now. It might be worth keeping an eye on.

Get stories like this in a free daily email


Please keep it civil. Don't post comments that are obscene, defamatory, threatening, off-topic, an infringement of copyright or an invasion of privacy. Read our forum standards and community guidelines.

You must be logged in to post comments. Please log in here or click the comment box below for options.

comments powered by Disqus