Corning’s 23.7% return over the past six months has outpaced the S&P 500 by 16%, and its stock price has climbed to $50.30 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is there a buying opportunity in Corning, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

We’re glad investors have benefited from the price increase, but we're cautious about Corning. Here are three reasons why you should be careful with GLW and a stock we'd rather own.

Why Do We Think Corning Will Underperform?

Supplying windows for some of the United States’s earliest spacecraft, Corning (NYSE:GLW) provides glass and other electronic components for the consumer electronics, telecommunications, automotive, and healthcare industries.

1. Long-Term Revenue Growth Disappoints

A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Unfortunately, Corning’s 3.2% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the industrials sector.

2. EPS Barely Growing

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Corning’s weak 3.6% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.

3. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Corning historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 4.6%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.

Final Judgment

We see the value of companies helping their customers, but in the case of Corning, we’re out. With its shares topping the market in recent months, the stock trades at 21.6× forward price-to-earnings (or $50.30 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Like More Than Corning

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