Corning Incorporated (NYSE:GLW) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of $27.38 is based on unrealistic expectations. Below I will be talking through a basic metric which will help answer this question.
Check out our latest analysis for Corning
Where’s the growth?
Investors in Corning have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. Expectations from 12 analysts are certainly positive with earnings per share estimated to rise from today’s level of $1.784 to $2.483 over the next three years. This results in an annual growth rate of 14%, on average, which signals a market-beating outlook in the upcoming years.
Is GLW’s share price justified by its earnings growth?
Stocks like Corning, with a price-to-earnings (P/E) ratio of 15.35x, always catch the eye of investors on the hunt for a bargain. In isolation, this metric can be a bit too simplistic but in comparison to benchmarks, it tells us that GLW is undervalued relative to the current US market average of 16.99x , and undervalued based on its latest annual earnings update compared to the Electronic average of 17.62x .
Given that GLW’s price-to-earnings of 15.35x lies below the industry average, this already indicates that the company could be potentially undervalued. However, since Corning is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 15.35x and expected year-on-year earnings growth of 14% give Corning an acceptable PEG ratio of 1.09x. Based on this growth, Corning’s stock can be considered slightly overvalued , based on the fundamentals.
What this means for you:
GLW’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:
- Financial Health: Are GLW’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Past Track Record: Has GLW been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of GLW’s historicals for more clarity.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.