Why Cognex Corporation (NASDAQ:CGNX) Could Be Worth Watching
Cognex Corporation (NASDAQ:CGNX), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Cognex’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Cognex
What Is Cognex Worth?
Cognex appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Cognex’s ratio of 39.1x is above its peer average of 16.11x, which suggests the stock is trading at a higher price compared to the Electronic industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Cognex’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Cognex generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 73% over the next couple of years, the future seems bright for Cognex. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in CGNX’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe CGNX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on CGNX for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for CGNX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. Luckily, you can check out what analysts are forecasting by clicking here.
If you are no longer interested in Cognex, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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