Corning Incorporated (GLW) takes advantage of the global growth of touch-screen technology in mobile devices, benefiting from its manufacturing advantage over peers and seeing increased free cash flow generation which may result in more dividends and share repurchases, even as it trades below liquidation value, says Daniel G. Lysik, Founder and Managing Director of Pratt Capital, LLC.
“In our opinion, the market is missing a couple important things with Corning. First, the company has a pristine balance sheet, more than $5 per share of net cash and long-term investments, 40% of the current market price. Market participants are overly concerned with near-term margins compression as the stock price is also currently trading below liquidation value. Third, investors are missing the company’s manufacturing advantage over their competition,” Lysik said.
Corning manufactures new products at current facilities, providing the company with significant incremental profits. The current ample capacity GLW enjoys will allow capital expenditures to fall by 30% in the next year or two, providing Corning with free cash flow that can be used to return capital to shareholders via share repurchases and dividend payments.
“Over the next couple of years, Corning should see margins improve, revenue growth re-accelerate, and we believe the company’s share price will move overtime towards its intrinsic value, which is north of $20. With the current share price near $12, we believe Corning is a great value investment with a significant margin of safety,” Lysik said.
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