Pick Amphenol Over Corning Stock?

We believe that Amphenol stock (NYSE: APH), an electrical, electronic, and fiber optic connectors maker, is currently a better pick than its industry peer, Corning stock (NYSE: GLW). APH stock trades at 6.5x trailing revenues, versus 3.4x for GLW stock, and we think this gap in valuation will remain in favor of APH, given its superior revenue growth, profitability, and better prospects. There is more to the comparison, and in the sections below, we discuss why we think APH will outperform GLW in the next three years. We compare a slew of factors, such as historical revenue growth, returns, and valuation.

1. APH Stock Has Outperformed GLW Stock In The Last Three Years

GLW stock has seen strong gains of 65% from levels of $30 in early January 2021 to around $50 now, vs. an increase of 150% for APH stock from $30 to $75 over the same period. This compares to the 60% returns for the S&P 500 over this four-year period.

However, the rise in these stocks has been far from consistent. Returns for GLW stock were 6% in 2021, -12% in 2022, and -1% in 2023, while that for APH were 35%, -12%, and 32%, respectively. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 — indicating that GLW underperformed the S&P in 2021 and 2023, although APH outperformed the broader markets in each of the last three years.

In fact, consistently beating the S&P 500 — in good times and bad — has been difficult over recent years for individual stocks; for heavyweights in the Information Technology sector including CSCO, COMM, and AAPL, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

2. APH’s Revenue Growth Is Better

Corning has seen its revenue rise at an average annual rate of 4.7% from $11.3 billion in 2020 to $12.6 billion in 2023. On the other hand, Amphenol’s average revenue growth rate of 14.0% from $8.6 billion to $12.6 billion over this period has been comparatively faster.

Corning’s revenue growth over the recent years was partly driven by increased demand for gasoline particulate filters, given the increased adoption of the emission regulations in Europe and China. However, its display technologies sales have trended lower due to a decline in volume and lower demand in the smartphone, tablet, and notebook markets, which have weighed on the specialty materials business as well. The optical communication segment sales of $4.0 billion in 2023, reflected a sharp 20% fall y-o-y, amid a softness in demand from mobile carriers.

However, Corning’s future revenue growth will benefit from its new optic products, including fiber, cables, and connectors, among others, aimed at reducing the overall installation costs. The company is targeting to add $3 billion in annual sales in the next three years, and a rebound in optical communication will be an important driver on that front. The demand for fiber optics is on the rise as data processing for AI systems increases, and this should bode well for Corning.

Amphenol’s revenue growth was also weighed down last year, amid lower demand from mobile carriers as well as devices. However, the automotive end market products have been doing well. So far this year, the company has seen a solid 18% rise in sales, driven by its communications solutions business, up 23% y-o-y. Notably, Amphenol is a supplier for Nvidia’s NVL72 system, which is estimated to sell tens of thousands of units over the next few years. This will bolster Amphenol’s top-line growth.

3. APH Is More Profitable And It Has A Better Financial Position

Corning’s operating margin increased from 4.5% in 2020 to 7.1% in 2023, while Amphenol’s operating margin expanded from 19.2% to 20.7% over this period. If we look at the last twelve-month period, APH’s operating margin of 21.3% fares much better than 6.5% for GLW.

Looking at financial risk, APH again fares better. Its 6% debt as a percentage of equity is lower than 20% for Corning. Furthermore, its 8% cash as a percentage of assets is slightly higher than 6% for the latter, implying that APH has a better debt position and more cash cushion.

4. The Net of It All

We see that Amphenol has seen better revenue growth, is more profitable, and offers lower financial risk than Corning. Now, looking at prospects, we still believe APH is the better choice of the two. At its current levels, GLW stock is trading at 3.4x trailing revenues, versus the stock’s average P/S ratio of 2.0x over the last four years. Similarly, APH stock is trading at 6.5x trailing revenues, versus the stock’s average P/S ratio of 4.5x over the last four years. Investors have assigned a higher valuation multiple for both stocks compared to their historical average, thanks to the potential demand from the AI boost.

We think this gap in valuation makes sense and may even expand in favor of APH, given its solid revenue potential from rising AI investments. APH stock stands to benefit from a ramp up in Nvidia’s Blackwell chips. Amphenol’s top-line is expected to grow at a high-teens average rate over the next few years, versus a mid-single-digit growth expected for Corning. Overall, we think investors are likely to be better off picking APH stock over GLW for robust long-term gains.

While APH may outperform GLW in the next three years, 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.

[1] Returns as of 12/3/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates