Can flat screens save Corning again?

Posted Jan 7th 2009 6:00PM by Jamie Dlugosch
Filed under: Television, Corning Inc (GLW), Stocks to Buy, Technology

As an early adopter of the flat-screen television craze, I can attest to the wonderful benefits of the device. I love mine, especially when watching movies or my favorite sporting event, hockey (it's so much easier following the puck in HD).

For a while there a few years ago, flat-screen TVs were flying off the shelves. Builders were using them as perks for new home purchases, and restaurants and bars seemed to buy them in bulk.

A main beneficiary of the flat-panel boom was Corning Inc. (NYSE: GLW) -- the largest maker of glass for flat-panel televisions.

In 2002, the stock was unduly pummeled in tandem with the rest of the technology sector. At that time, one could fetch shares for the eye-catching price of a buck a share. Investors were speculating that GLW would ultimately fail as demand for its products crashed.

Flat-panel displays saved the day. The company fixed its balance sheet and shares rocketed higher off its lows. By 2006, shares of GLW peaked above $26 per share. It was a great run, but with the collapse of the housing bubble, the easy money in GLW was made.

It took a year or so before the bubble truly burst in 2008. During the last year, the stock finally succumbed to a slowing global economy, as shares lost more than half their value. Today you can own GLW for $11 or so.

Does that make the company a buy? Possibly, but let's take a closer look.

For starters, shares trade for just three times trailing earnings. Of course, trailing earnings don't include much of the deep recession that is now happening around the globe. That said, a low valuation is helpful from a risk/reward standpoint.

Analysts expect the company to make $1.59 per share for the full year 2008. For 2009, that number drops significantly. Current estimates are for the company to make 95 cents next year.

On a forward basis, GLW trades for a bit more than 12 times current estimates. The company has a strong balance sheet and more than $3 billion of cash in hand. There's a lot to like about the company.

The growth story may be on pause, but investors today appear to be protected on the downside. A deep recession that lasts longer than currently expected may result in more pain for GLW, but I think a long-term recovery is more than possible -- it's probable.

Jamie Dlugosch is a contributor to InvestorPlace.com.

Tags: flat panel, flat screen, flat-panel tvs, Flat-panelTvs, flat-screen, FlatPanel, FlatScreen, hdtv