Cognex Corporation provides machine vision products that capture and analyze visual information in order to automate tasks primarily in manufacturing processes worldwide. The company offers machine vision products, which are used to automate the manufacturing and tracking of discrete items, such as mobile phones, aspirin bottles, and automobile tires by locating, identifying, inspecting, and measuring them during the manufacturing or distribution process. Its products include VisionPro, a software suite that provides various vision tools for programming; displacement sensors with vision software for use in 3D application; In-Sight vision systems that perform various vision tasks, including part location, identification, measurement, assembly verification, and robotic guidance; In-Sight vision sensors; ID products, which are used for reading codes that are applied on discrete items during the manufacturing process, as well as have applications in logistics automation for package sorting and distribution; DataMan barcode readers; barcode verifiers; vision-enabled mobile terminals for industrial barcode reading applications; and barcode scanning software development kits. The company sells its products through direct sales force, as well as through a network of distributors and integrators. Cognex Corporation was founded in 1981 and is headquartered in Natick, Massachusetts.
(Summary) (Company) (Chart)
8 March 2017
1yr Target $74.50
Payout Ratio 17.44%
1yr Cap Gain -6.78%
1yr Tot Return -6.41%
EPS (ttm) $1.72
EPS next yr $2.31
Forward P/E 34.58
EPS next 5yr 23.41%
1yr Price Support $54.07
Market Cap $6.80 Bil
Revenues $520.80 Mil
Earnings $149.80 Mil
Profit Margin 28.76%
Quick Ratio 7.60
Current Ratio 8.00
1yr RevGR 15.57%
3yr RevGR 18.96%
5yr RevGR 10.09%
1yr EarnGR -19.25%
3yr EarnGR 27.18%
5yr EarnGR 15.96%
1yr DivGR 40.47%
3yr DivGR ---
5yr DivGR 10.38%
Machine Vision Market
Cognex machine vision is primarily used in the manufacturing sector, where the technology is widely recognized as an important component of automated production and quality assurance. In this sector, the Company’s customers are primarily in the factory automation market. Factory automation customers purchase Cognex vision products and incorporate them into their manufacturing processes. Virtually every manufacturer can achieve better quality and manufacturing efficiency by using machine vision, and therefore, this market includes a broad base of customers across a variety of industries, including consumer electronics, automotive, consumer products, food and beverage, medical devices, and pharmaceuticals. Factory automation customers also purchase Cognex products for use outside of the assembly process, such as using ID products in logistics automation for package sorting and distribution. Sales to factory automation customers represented 95% of total revenue in 2015 compared to 94% of total revenue in 2014.
A small percentage of the company's customers are in the semiconductor and electronics capital equipment market. These customers purchase Cognex vision products and integrate them into the automation equipment that they manufacture and then sell to their customers to either make semiconductor chips or assemble printed circuit boards. Demand from these customers has been relatively flat on an annual basis for the past several years. Sales to semiconductor and electronics capital equipment manufacturers represented only 5% of total revenue in 2015 compared to 6% of total revenue in 2014.
In 2015 and 2014, direct and indirect revenue from Apple Inc. accounted for 18% and 16% of total revenue, respectively. In 2013, no customer accounted for greater than 10% of total revenue.
Cognex Corp's goal is to expand their position as a leading worldwide provider of machine vision products. Sales to customers in the factory automation market represent the largest percentage of our total revenue, and the company believes that this market provides the greatest potential for long-term revenue growth.
In order to grow the factory automation market, Cognex Corp has invested in developing new products and functionality that make vision easier to use and more affordable, and therefore, available to a broader base of customers. This investment includes selective expansion into new industrial vision applications through internal development, as well as the acquisition of businesses and technologies. The company has also invested in building a worldwide sales and support infrastructure in order to access more of the potential market for machine vision. This investment includes opening sales offices in emerging markets, such as China, India, Brazil, and Eastern Europe, where Cognex believes many manufacturers can benefit from incorporating machine vision into their production processes, and developing strategic alliances with other leading providers of factory automation products.
Acquisitions and Divestitures
The company's business strategy includes selective expansion into new machine vision applications and markets through the acquisition of businesses and technologies. They plan to continue to seek opportunities to expand our product line, customer base, distribution network, and technical talent through acquisitions in the machine vision industry.
On July 6, 2015, Cognex completed the sale of their Surface Inspection Systems Division (SISD) to AMETEK, Inc. for $156 million in cash and the company now operates in one segment, machine vision technology. The company offers a variety of machine vision products that have similar economic characteristics, have the same productions processes, and are distributed by the same sales channels to the same types of customers.
On August 21, 2015, Cognex acquired selected assets of Manatee Works, Inc., a privately-held U.S.-based developer of barcode scanning software development kits (SDKs). Cognex plans to leverage Manatee's current developer network and business model of attracting new developers to drive leads for their ID products. As a result of this transaction, the company also acquired technology for use in mobile devices.
Cognex offers a full range of vision and ID products designed to meet customer needs at different performance and price points. Their products range from low-cost vision sensors that are easily integrated, to PC-based systems for users with more experience or more complex requirements. Their products also have a variety of physical forms, depending upon the user’s need. For example, customers can purchase vision software to use with their own camera and processor, or they can purchase a standalone unit that combines camera, processor, and software into a single package.
Vision software provides users with the most flexibility by combining the full general-purpose library of Cognex vision tools with the cameras, frame grabbers, and peripheral equipment of their choice. The vision software may run on the customer’s PC, which enables easy integration with PC-based data and controls. Applications based upon Cognex vision software perform a wide range of vision tasks, including part location, identification, measurement, assembly verification, and robotic guidance. Cognex's VisionPro® software offers an extensive suite of patented vision tools for advanced programming, while Cognex Designer allows customers to build complete vision applications with the simplicity of a graphical, flowchart-based programming environment. Cognex also offers a series of Displacement Sensors that are sold with vision software for use in highly demanding three-dimensional applications.
Vision systems combine camera, processor, and vision software into a single, rugged package with a simple and flexible user interface for configuring applications. These general-purpose vision systems are designed to be easily programmed to perform a wide range of vision tasks including part location, identification, measurement, assembly verification, and robotic guidance. Cognex offers the In-Sight® product line of vision systems in a wide range of models to meet various price and performance requirements.
Unlike general-purpose vision systems that can be programmed to perform a wide variety of vision tasks, vision sensors are designed to deliver very simple, low-cost, reliable solutions for a limited number of common vision applications such as checking the presence and size of parts. Cognex offers the Checker® product line of vision sensors that performs single-purpose vision tasks. Late in 2015, Cognex introduced a new vision sensor, the In-Sight 2000 Series, which combines the power of an In-Sight vision system with the simplicity and affordability of a vision sensor.
ID products quickly and reliably read codes (e.g., one-dimensional barcodes or two-dimensional data matrix codes) that have been applied to, or directly marked on, discrete items during the manufacturing process. Manufacturers of goods ranging from automotive parts, pharmaceutical items, aircraft components, and medical devices are increasingly using direct part mark (DPM) identification to ensure that the appropriate manufacturing processes are performed in the correct sequence and on the right parts. In addition, DPM is used to track parts from the beginning of their life to the end, and is also used in supply chain management and repair.
Cognex also offers applications in the automatic identification market outside of the manufacturing sector, such as using ID products in logistics automation for package sorting and distribution. As shipping volumes grow, more distribution centers are choosing to upgrade their traditional laser-based scanners to image-based barcode readers, which will cost-effectively increase package sorter efficiency and throughput by improving read rates. Cognex offers the DataMan® product line of ID readers that includes both hand-held and fixed-mount models.
I've been watching this company for awhile as the price of the shares have rocketed higher and higher. They make a product that's integral to the manufacturing process and can be used in all kinds of industries. So naturally I'd like to have shares of a company like that in my portfolio. But finding great companies and finding great companies whose shares are on sale are two different situations. And in this situation the shares of Cognex are currently just too expensive.
At this point Cognex will have to remain on my watch list. I'd much rather purchase shares of this company somewhere in the vicinity of around $46-$50 per share. That would put the price of the shares near 20 times next years earnings. But that's quite a bit lower than the current price.