The company's use of asbestos as a fireproofing agent led to major medical liabilities and the company was forced to file for Chapter 11 bankruptcy in 2000. A subsequent reorganization and recapitalization allowed the company to emerge from Chapter 11 in October 2006.
Today Owens Corning's products and systems save energy and improve personal comfort in both commercial and residential buildings. Through its glass reinforcements business, the company makes thousands of products lighter, stronger and more durable for the construction industry. Owens Corning had sales of $5.3 billion in 2014 and currently employs approximately 15,000 people in 26 countries. Additionally, Owens Corning has been a Fortune 500 company for 61 consecutive years.
Owens Corning produces and sells glass fiber reinforcements and other materials for composite systems; and residential and commercial building materials worldwide. It operates in three segments: Composites, Insulation, and Roofing. The Composites segment manufactures, fabricates, and sells glass reinforcements in the form of fiber; and manufactures and sells glass fiber products in the form of fabrics, mat, veil, and other specialized products. Its products are used in pipe, roofing shingles, sporting goods, consumer electronics, telecommunications cables, boats, aircraft, defense, automotive, industrial containers, and wind-energy applications in the power and energy, housing, water distribution, industrial, transportation, consumer, and aerospace/military markets. The Insulation segment manufactures and sells fiberglass insulation into residential, commercial, industrial, and other markets for thermal and acoustical applications; and manufactures and sells glass fiber pipe insulation, flexible duct media, bonded and granulated mineral wool insulation, and foam insulation used in above- and below-grade construction applications. It sells its products primarily to the insulation installers, home centers, lumberyards, retailers, and distributors. The Roofing segment manufactures and sells residential roofing shingles and oxidized asphalt materials used in residential and commercial construction, and specialty applications. This segment sells its products through home centers, lumberyards, retailers, distributors, and contractors, as well as to roofing contractors and distributors for built-up roofing asphalt systems and to manufacturers various other industries, including automotive, chemical, rubber, and construction. The company was founded in 1938 and is headquartered in Toledo, Ohio.
(Summary) (Company) (Chart)
20 September 2015
1yr Target $48.34
Payout Ratio 41.46%
1yr Cap Gain 4.54%
1yr Tot Return 6.01%
EPS (ttm) $1.64
EPS next yr $2.90
EPS next 5yr 28.10%
Est Price next yr $81.49
Market Cap $5.44 Bil
Revenues $5.26 Bil
Earnings $194.00 Mil
Profit Margin 3.68%
1yr EarnGR 11.69%
3yr EarnGR -4.99%
5yr EarnGR 30.74%
1yr DivGR 6.25%
3yr DivGR ---
5yr DivGR ---
Quick Ratio 1.30
Current Ratio 2.10
Owens Corning was formed in Toledo, Ohio, in 1935. During its first year it developed Navy Board, a lightweight, nonflammable insulation with a finished wall surface. This was its main product throughout the World War II years. In 1944 the company produced and began selling the first fiberglass reinforced plastic boat hull.
After the war, as car factories were converted from army material back to auto production, the company worked with automakers to produce the first fiberglass reinforced plastic car body. In 1953, General Motors used this type of body in the production of the Chevrolet Corvette.
In 1954, the company invented a process to make centrifugally spun fiberglass wool, which quickly became the standard for producing fiberglass insulation. In 1957 the company launched the "Comfort Conditioned Home" program to promote sales of residential insulation.
In 1977, it acquired a shingle and asphalt company and started the manufacture of fiberglass reinforced roofing shingles, the current industry standard.
In 1980, it licensed United Artists' Pink Panther cartoon character as its mascot for the insulation, and trademarked its product's pink color in 1987.
In 2000 the company was forced to file for Chapter 11 bankruptcy because of civil liabilities in three 1995-1999 lawsuits. The lawsuits concerned the use of asbestos in its Kaylo product, a high-temperature calcium silicate pipe insulation, manufactured by Owens Corning from 1952 to 1972. After a successful reorganization and recapitalization, the company emerged from Chapter 11 on October 31, 2006.
In 2007, the company expanded when it acquired Saint-Gobain's building reinforcements and composite fabrics business. Finally in 2011 it developed a process to make formaldehyde free insulation with 50 percent recycled content.
Buying shares of Owens Corning is buying into the idea that the economy is improving going forward, and that both the housing markets and the remodeling markets will improve. In fact, I believe that will be the exact case moving forward. With earnings for Owens Corning estimated to improve better than 20% next year, over 35% the next year, and over 28% on average for the next five years, I think this company's stock price is about to move higher than estimates. And actually quite a bit higher. In fact I believe that the 16 analysts' estimated target of $48.34 is way too low. Even with a P/E ratio of only twenty next year, the estimated stock price would rise to near $58 per share. With a P/E ratio remaining near its estimated earnings growth rate, the price would be nearer to $81 per share. But even at $58, that's a twenty five percent increase over the current price.
Most investors would shy away from any stock with a P/E ratio near 28 but with a PEG ratio of only 1, a P/E of this size is not totally unreasonable. In fact it just reinforces the fact that the company is growing at a very fast rate. And that's the kind of company I'm generally interested in.
While Owens Corning doesn't meet all the parameters I usually look for in a company, it does have enough of them to peak my interest. Like many of my other investments, I intend to start a small position in this security over the next few days or weeks. I then will allow that position to grow naturally through dividend reinvestments and eventually through the sale of derivatives.
I expect this to be a great stock to hold for at least five years. And perhaps longer.