For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Cognex Corporation (NASDAQ:CGNX) useful as an attempt to give more color around how Cognex is currently performing.
Was CGNX’s recent earnings decline indicative of a tough track record?
CGNX’s trailing twelve-month earnings (from 01 July 2018) of US$169m has declined by -13% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 21%, indicating the rate at which CGNX is growing has slowed down. What could be happening here? Let’s examine what’s going on with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, Cognex has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 12% exceeds the US Electronic industry of 5.3%, indicating Cognex has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Cognex’s debt level, has increased over the past 3 years from 20% to 23%.
What does this mean?
Though Cognex’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors influencing its business. I suggest you continue to research Cognex to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CGNX’s future growth? Take a look at our free research report of analyst consensus for CGNX’s outlook.
- Financial Health: Are CGNX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 01 July 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.