We believe that corning inventory (NYSE: GLW) is currently a better choice than its competitor Belden Stock (NYSE: BDC), despite a comparatively higher valuation of 1.9x trailing earnings versus 1.1x for Belden. This valuation gap can be attributed to Corning’s superior revenue growth in recent years and improved profitability.
In terms of stock returns, BDC, with returns of -2% so far this year, has fared better than GLW stock, which is down 11%, and both have outperformed the broader S&P500 index, down 16% during this period. The comparison goes deeper and in the sections below we explain why we believe GLW shares will outperform BDC shares over the next three years. We compare a host 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? Parts of the analysis are summarized below.
1. Corning’s revenue growth has been better in recent years
- Both companies have managed to record robust sales growth in recent quarters. Still, Belden has seen relatively faster revenue growth of 23.7% over the last twelve months, compared to 11.0% for Corning.
- However, over a longer period, Corning fared better, with sales increasing at an 8.2% CAGR to $14.1 billion in 2021 from $11.3 billion in 2021. 2018, while Belden’s sales grew at an average annual rate of 5.0% to $2.4 billion from $2.2 billion in the same period.
- For Corning, revenue growth was partly driven by increased demand for gasoline particulate filters, given increased adoption of emissions regulations in Europe and China. However, more recently, auto sales have been on a downward trend due to the shortage problem of semiconductor chips weighing down the overall auto production.
- In recent quarters, Corning has benefited from a recovery in fiber optic demand as carriers continue to expand 5G coverage.
- Belden provides signal transmission solutions, including networking, connectivity and cable products, operating 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 building and 5G products.
- Our Corning revenue and Belden turnover dashboards provide more detail on business revenue.
- The table below summarizes our revenue forecast for both companies over the next three years and indicates a CAGR of 5.1% for Corning, compared to a CAGR of 1.6% for Belden.
- Note that we have different methodologies for companies negatively impacted by Covid and those not impacted or positively impacted by Covid when forecasting future revenues. For companies negatively affected by Covid, we consider the quarterly revenue recovery trajectory to predict recovery at the pre-Covid revenue growth rate. Beyond the recovery point, we apply the average annual growth observed three years before Covid to simulate a return to normal conditions. For companies with positive revenue growth during Covid, we consider the average annual growth before Covid with some growth weight during Covid and the last twelve months.
2. Corning is more profitable
- Corning’s operating margin of 19.2% in the last twelve months is much better than Belden’s 4.9%.
- This compares to the figures of 15.6% and 7.2% seen in 2019, before the pandemic, respectively.
- 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 contain more details.
- When it comes to financial risk, the two are comparable. Corning’s 24.4% debt as a percentage of equity is lower than Belden’s 39.8%, but its 5.5% cash as a percentage of assets is lower than the latter’s 17.4%, implying that Corning has a better debt position and that Belden has more cash cushion.
3. Filet of Everything
- We see that historical revenue growth, profitability and debt position are better for Corning. On the other hand, Belden has a larger cash cushion and is trading at a comparatively lower valuation.
- Now, looking at the outlook, using P/S as a base, due to the large swings in both P/E and P/EBIT, we believe Corning is currently the better choice of the two, despite its higher valuation.
- The table below summarizes our revenue and return forecasts for both companies over the next three years and indicates an expected return of 20% for Corning over this period against a -2% expected return on Belden shares, implying investors would be better off buying GLW rather than BDC, based on Trefis Machine Learning analysis – Corning vs. Belden – which also provides more detail on how we arrive at these numbers.
Although GLW stocks may outperform BDC, it is useful to see how Corning Peers price on the measures that matter. You will find other useful comparisons for companies in all sectors on Peer comparisons.
In addition, the Covid-19 crisis has created many price discontinuities, which can offer interesting trading opportunities. For example, you’ll be surprised how counter-intuitive stock valuation is to AZZ vs. Beacon Roofing Supplies.
With inflation rising and the Fed raising interest rates, among other factors, GLW stock has fallen 11% this year. Can it fall more? See how low Corning stock can go by comparing its drop in previous stock market crashes. Here is a summary of how all stocks performed during previous stock market crashes.
What if you were looking for a more balanced portfolio instead? Our quality portfolio and multi-strategy portfolio have consistently beaten the market since late 2016.
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