We believe that Corning stock (NYSE: GLW) is currently a better pick over its competitor Belden stock (NYSE: BDC), despite trading at a comparatively higher valuation of 1.9x trailing revenues vs. 1.1x for Belden. This valuation gap can be attributed to Corning’s superior revenue growth over recent years and better profitability.
Looking at stock returns, BDC, with -2% returns 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% over this period. There is more to the comparison, and in the sections below, we discuss why we believe GLW stock will offer better returns than BDC stock in the next three years. We compare a slew 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 Over The Recent Years
- Both companies managed to see robust sales growth over the recent quarters. Still, Belden has witnessed comparatively faster revenue growth of 23.7% over the last twelve months, compared to 11.0% for Corning.
- However, looking at a longer time frame, Corning has fared better, with its sales rising at an average annual growth rate of 8.2% to $14.1 billion in 2021, compared to $11.3 billion in 2018, while Belden’s sales grew at an average annual rate of 5.0% to $2.4 billion from $2.2 billion over the same period.
- For Corning, the revenue growth was partly driven by increased demand for gasoline particulate filters, given the increased adoption of the emission regulations in Europe and China. However, more recently, automotive sales have been trending lower due to the semiconductor chip shortage issue weighing on overall automotive production.
- Over the recent quarters, Corning has benefited from a pickup in demand for optical fiber as carriers continue to expand their 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 over the recent years has been driven by higher demand for its industrial automation, smart buildings, and 5G products.
- Our Corning Revenue and Belden Revenue dashboards provide more details on the companies’ revenues.
- The table below summarizes our revenue expectation for both companies over the next three years and points to 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 while forecasting future revenues. For companies negatively affected by Covid, we consider the quarterly revenue recovery trajectory to predict recovery to the pre-Covid revenue run 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 registering positive revenue growth during Covid, we consider yearly average growth before Covid with a certain weight to growth during Covid and the last twelve months.
2. Corning Is More Profitable
- Corning’s operating margin of 19.2% over the last twelve-month period is much better than 4.9% for Belden.
- This compares with 15.6% and 7.2% figures seen in 2019, before the pandemic, respectively.
- Corning’s 22.0% free cash flow margin is better than 9.3% for Belden.
- Our Corning Operating Income and Belden Operating Income dashboards have more details.
- Looking at financial risk, both are comparable. 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 better debt position, and Belden has more cash cushion.
3. The Net of It All
- We see that the historical revenue growth, profitability, and debt position are better for Corning. On the other hand, Belden has more cash cushion and is trading at a comparatively lower valuation.
- Now, looking at prospects, using P/S as a base, due to high fluctuations in 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 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 that investors are better off buying GLW over BDC, based on Trefis Machine Learning analysis – Corning vs. Belden – which also provides more details on how we arrive at these numbers.
While GLW stock may outperform BDC, it is helpful to see how Corning’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
Furthermore, the Covid-19 crisis has created many pricing discontinuities, which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for AZZ vs. Beacon Roofing Supplies.
With inflation rising and the Fed raising interest rates, among other factors, GLW stock has seen a fall of 11% this year. Can it drop more? See how low Corning stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.
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