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Cognex Corporation (NASDAQ: CGNX) makes machine vision solutions that gather and interpret visual data to automate manufacturing and distribution processes that involve vision. Customers may choose from a variety of machine vision systems and sensors, vision software, and industrial image-based barcode scanners. Its products vary from basic presence/absence checks using vision sensors to deep learning solutions for complicated applications with flaws and deviations.
Key takeaways from Q1 FY22 (Ended April 03, 2022)
Recent Developments
Other Key events of Q1 FY22
Balance Sheet & Liquidity Position
Top 10 shareholders
The top 10 shareholders together form around 43.33% of the total shareholding, while the top 4 constitute the maximum holding. The Vanguard Group, Inc., and BlackRock Fund Advisors hold the maximum stake in the company at 8.84% and 8.42%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis
Product risk: A significant portion of the company’s products is presently manufactured by a third-party contractor located in Indonesia. Further, certain key electronic and mechanical components, such as integrated circuit chips, are fundamental to the design of Cognex products.
Macroeconomic risk: Due to the impact of the COVID-19 pandemic and other factors, CGNX has experienced, and may continue to experience, disruptions to the supply of components for the company’s products that have resulted, and may continue to result, in higher purchase costs, delivery costs, and manufacturing delays.
Outlook for Q2 FY 2022
Valuation Methodology: Price/Earnings Multiple Based Relative Valuation
(Analysis by Kalkine Group)
* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation:
Cognex Corporation has built upon strong fundamentals, a significant margin advantage over its competitors, and a business secured by patents and intellectual property rights. The company has paid dividends for 19 years in a row, returned USD 1.5 billion in total cash to shareholders since 1981, generated a 14 percent 10-year revenue CAGR (2011-2021), and heavily invested in R&D to improve the value proposition of its products, with 13 percent of revenue allocated to R&D in 2021.
Further, CGNX shares have corrected significantly over the past three months, down 37.15%. The stock is currently leaning towards the lower end of its 52-week range of USD 44.60 to USD 92.17. We believe that the company should trade at a premium to its peer's average as per the historical averages, given its strong competitive advantage against the peer regarding profitability and operational metrics. We have valued the stock using the Price/ Earnings Per Share multiple-based relative valuation method and arrived at a target price of USD 56.35.
Considering the strong fundamentals, robust margins, risk profile, positive outlook, associated risks, and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 47.10, as of June 01, 2022.
1-Year Technical Price Chart (as of June 01, 2022) Source: REFINITIV, Analysis by Kalkine Group
Technical Levels Summary
*Closing Price as of June 01, 2022
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Note 3: The report publishing date is as per the Pacific Time Zone.
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