Watch for the Third Rail at Corning

So far, we've learned that Corning has a very weak balance sheet -- roughly $3.8 billion in long-term debt vs. a total revenue stream of only $3 billion. And we've learned that even against a once-in-a-lifetime macro backdrop, Corning couldn't generate any cash for shareholders. If it didn't generate cash from operations, where did cash come from?

Cash Sinkholes

The friendly public markets provide the cash for Corning. Because the company can't generate cash from operations, it sells stock and issues debt.

One more table: Let's see what happened to the cash that investors provided. That will determine just how skilled the capital allocators are at Corning:

Shrinking Equity Shareholders give it book value

On the basis of my review, I'd say Corning's $7 billion valuation is outrageous. It suggests that investors are hoping for a second gold rush, another Internet buildout. Considering the state of Corning's balance sheet and its participation in commoditized, weak end-markets, I'd put a value of $2 per share on Corning stock, at most. Corning closed Tuesday at $6.15.

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