Why Cognex Stock Is Full of Opportunity

Cognex (NASDAQ: CGNX) eyes potential to capture more of its addressable market. In this clip from “3 Minute Stocks Updates” on Motley Fool Live, recorded on March 30, Motley Fool contributor Brian Withers discusses the growth opportunities that lie ahead for the machine vision company.

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Brian Withers: Let me jump into Cognex, ticker symbol CGNX. We haven’t done this on the show, so I thought I might give you a bit of an overview, in addition to covering the full-year results. Here we go. Cognex is into machine vision and they have this neat little thing in their investor presentation. It’s about seeing the world and then, the brain part of it is, interpreting what is seen and you can see on the right-hand side there with vision software and algorithms. So, the company has four major use cases that it’s modeling. You can guide like the vision sting in the upper left, that robot, it’s guiding the robot to place the printed circuit board in the right place. Identification, making sure that this particular box goes to wherever direction, gauge, measuring things, as well as an inspection. So there’s lots of use cases in the manufacturing and distribution world. I love this slide. In fact, there’s 360 million factories worldwide, and unfortunately, about 10% of them end up being visual inspectors, a mind-numbing job of looking at the product and trying to capture errors. Lots of different industries that use their products. You can see the list of them there on the left and the market that Cognex is in. You can see they started in 2D vision, the column on the left-hand side. Obviously, they’ve made that their biggest share into the addressable market. They’re also into factory automation, logistics over a couple of years ago, 3D vision, which is a really cutting-edge technology as well as life science and terminal. They see a ton of addressable market out there in the different areas that they serve. Let’s look at the 2021 results. A billion in revenue, pretty solid company for sure, it’s well-established. That’s up 28% year-over-year and as you go down the balance sheet, you can see that they are spending less on research and development, SG&A. The operating income thus is improving and so, when you look at the net income on the bottom line, it’s gone from 24% of revenue to 26% of revenue. So, that’s growing faster than the top line. Pretty solid year all around for Cognex. If you look at the five-year history of the stock, it’s just about keeping up with the market but I think with the growth engines that they have, it’s got a lot of opportunity ahead.

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Brian Withers has no position in any of the stocks mentioned. The Motley Fool owns and recommends Cognex. The Motley Fool has a disclosure policy.

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