we believe that Corning stock (NYSE: GLW) is currently a better choice than its competitor Called stock (NYSE: BDC), despite trading at a relatively higher valuation of 1.9x lagging earnings versus 1.1x for Belden. This valuation gap can be attributed to Corning’s superior revenue growth in recent years and improved profitability.
Looking at stock returns, BDC, with returns of -2% so far this year, has outperformed GLW stocks, which are down 11%, and both have outperformed the broader S&P500 index, down 16 % over this period. There’s more to the equation, and in the sections below we’ll discuss why we think GLW stocks will outperform BDC stocks over the next three years. We compare a range of factors, such as historical revenue growth, returns and valuation multiple, in an interactive dashboard analysis of: Corning vs. Belden: Which stock is a better bet? Portions of the analysis are summarized below.
1. Corning’s revenue growth has been better in recent years
- Both companies have achieved robust revenue growth in recent quarters. Still, Belden has seen relatively faster revenue growth of 23.7% over the past twelve months, compared to 11.0% for Corning.
- However, if we look over a longer time frame, Corning has outperformed, with average annual growth of 8.2% to $14.1 billion in 2021, compared to $11.3 billion in 2018, as Belden’s revenue grew. at an average annual growth rate of 5.0% to $2.4 billion, from $2.2 billion over the same period.
- Corning’s sales growth was partly driven by increased demand for gasoline particulate filters, given the increased adoption of emissions regulations in Europe and China. More recently, however, car sales have fallen due to the problem of the shortage of semiconductor chips weighing on overall car production.
- In recent quarters, Corning has benefited from an increase in fiber demand as carriers continue to expand their 5G coverage.
- Belden offers signal transmission solutions, including network, connectivity and cable products, and operates in two segments: Enterprise Solutions and Industrial Solutions.
- Belden’s revenue growth in recent years has been driven by increased demand for its industrial automation, smart buildings and 5G products.
- U.S Corning Income and Belden earnings dashboards provide more details about the revenues of the companies.
- The table below summarizes our revenue forecast for both companies for the next three years and points to a CAGR of 5.1% for Corning, compared to a CAGR of 1.6% for Belden.
- Please note that we have different approaches for businesses negatively impacted by Covid and businesses not or positively impacted by Covid as we forecast future earnings. For businesses negatively impacted by Covid, we factor in the quarterly revenue recovery trajectory to predict recovery from pre-Covid revenue returns. Beyond the recovery point, we apply the average annual growth observed three years before Covid to simulate a return to normal conditions. For companies that register positive sales growth during Covid, we consider the annual average growth before Covid with a certain weight of growth during Covid and the last twelve months.
2. Corning is more profitable
- Corning’s operating margin of 19.2% over the past twelve months is much better than Belden’s 4.9%.
- This compares to the figures of 15.6% and 7.2% respectively in 2019, before the pandemic.
- Corning’s free cash flow margin of 22.0% is better than Belden’s 9.3%.
- Our Corning Operating Income and Belden Operating Income dashboards have more details.
- If we look at financial risk, both are similar. Corning’s 24.4% debt as a percentage of equity is lower than 39.8% for Belden, but its 5.5% cash as a percentage of assets is lower than 17.4% for the latter, implying that Corning has a has better debt and Belden has more cash kisses.
3. The net of everything
- We see that historical revenue growth, profitability and debt position are better for Corning. On the other hand, Belden has more cash buffer and trades at a relatively lower valuation.
- Now, looking at the outlook, based on the P&L, because of the high swings in the P/E and P&L, we think Corning is currently the better choice of the two, despite the higher rating.
- The table below summarizes our revenue and return expectations for both companies over the next three years and points to an expected return of 20% for Corning over this period vs. a -2% expected return for Belden stock, implying investors better buy GLW than BDC, based on Trefis Machine Learning analysis – Corning vs. Belden – which also provides more details on how we arrive at these figures.
While GLW stocks could outperform BDC, it’s helpful to see how Corning’s Peers rate on metrics that matter. Other valuable comparisons for companies in different sectors can be found at Pear Comparisons.
In addition, the Covid-19 crisis has led to many price discontinuities, which can provide attractive trading opportunities. For example, you will be amazed at how counterintuitive stock valuation is AZZ vs Beacon Roofing Supplies.
With inflation rising and the Fed raising interest rates, among other things, GLW stock is down 11% this year. Can it go down even more? See how low Corning stocks can go by comparing the decline in past market crashes. Here’s a performance breakdown of all stocks in past market crashes.
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