Value
4.2/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 1.3 |
| P/S | 3.4 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 2.9 |
| PEG | 10.0 |
| Analyst target | 5.0 |
- ▸Forward P/E: 36.1x
- ▸PEG: 0.30
CGNX · Why this verdict
Why Cognex (CGNX) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.7/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Cognex combines a high-quality balance sheet with excellent cash conversion and strong 24% revenue growth, but a forward price-to-earnings of 37.4x leaves little margin for error and the current reward-to-risk of 0.59-to-1 is well below any reasonable asymmetry bar.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Free cash flow is running at 127% of net income — meaning the business generates more cash than it reports as earnings — and the Rule of 40 score of 42 (passing the threshold) reflects a software-oriented business model converting growth into durable cash. Quality breakdown | Free cash flow stays above 100% of net income and Rule of 40 stays above 40 in each of the next two reported quarters. | →Stable |
| CounterA leverage penalty from a debt-to-equity ratio of 5.0 — well above typical levels — could compress free cash flow if financing costs rise or the debt load requires accelerated repayment, eroding the current conversion advantage. | ||
Revenue is growing at roughly 24% year-over-year, earning the company a leading position in its peer group on the growth dimension and supporting the premium multiple the market is currently applying. Growth breakdown | Revenue growth stays above 15% year-over-year for at least 2 of the next 4 reported quarters. | →Stable |
| CounterThe business operates in an instrument and automation end market with meaningful cyclical exposure; a slowdown in industrial capital spending can rapidly compress growth rates, and the current 24% may reflect a recovery cycle rather than a durable structural trajectory. | ||
A forward price-to-earnings of 37.4x — significantly above the sector average — prices in sustained strong growth with no room for execution missteps; even a modest guidance reduction could produce a disproportionate multiple compression. Valuation breakdown | This pillar is falsified if the forward P/E compresses below 28x as earnings estimates are revised upward faster than price appreciation, demonstrating the premium is being earned down. | →Stable |
| CounterA PEG ratio of 0.31 indicates the market is not paying a premium relative to the growth rate, suggesting the 37x multiple may be less extended than it appears when viewed alongside the earnings trajectory. | ||
The company has beaten consensus estimates in three straight quarters, with the most recent surprise coming in at 37%, followed by beats of 23% and 14% — a pattern of consistent and widening outperformance against analyst expectations. Earnings | EPS surprise stays above 10% in each of the next 2 reported quarters, sustaining the recent beat pattern. | →Stable |
| CounterThe quarter before the three-quarter beat streak was an in-line result at 5%, suggesting the cadence can be interrupted; if the most recent 37% beat was driven by a lumpy order cycle rather than structural demand, the next quarter may see a sharp normalization. | ||
With only 4.1% upside to the analyst-derived target and a reward-to-risk of 0.59-to-1 — the downside to the stop outweighs upside by nearly two-to-one — the current setup does not offer sufficient asymmetry to justify initiating or adding to a position. Engine gate (failed) | This pillar is falsified if the stock pulls back to a level establishing reward-to-risk above 1.5-to-1 or if analyst targets are raised above $75, opening more than 12% of headroom. | →Stable |
| CounterMomentum is softly positive — above the 200-day moving average with rising OBV — and a further strong earnings print could catalyze an analyst target upgrade that shifts the risk/reward quickly. | ||
Free cash flow is running at 127% of net income — meaning the business generates more cash than it reports as earnings — and the Rule of 40 score of 42 (passing the threshold) reflects a software-oriented business model converting growth into durable cash.
→StableQuality breakdown
- Expectation
- Free cash flow stays above 100% of net income and Rule of 40 stays above 40 in each of the next two reported quarters.
CounterA leverage penalty from a debt-to-equity ratio of 5.0 — well above typical levels — could compress free cash flow if financing costs rise or the debt load requires accelerated repayment, eroding the current conversion advantage.
Revenue is growing at roughly 24% year-over-year, earning the company a leading position in its peer group on the growth dimension and supporting the premium multiple the market is currently applying.
→StableGrowth breakdown
- Expectation
- Revenue growth stays above 15% year-over-year for at least 2 of the next 4 reported quarters.
CounterThe business operates in an instrument and automation end market with meaningful cyclical exposure; a slowdown in industrial capital spending can rapidly compress growth rates, and the current 24% may reflect a recovery cycle rather than a durable structural trajectory.
A forward price-to-earnings of 37.4x — significantly above the sector average — prices in sustained strong growth with no room for execution missteps; even a modest guidance reduction could produce a disproportionate multiple compression.
→StableValuation breakdown
- Expectation
- This pillar is falsified if the forward P/E compresses below 28x as earnings estimates are revised upward faster than price appreciation, demonstrating the premium is being earned down.
CounterA PEG ratio of 0.31 indicates the market is not paying a premium relative to the growth rate, suggesting the 37x multiple may be less extended than it appears when viewed alongside the earnings trajectory.
The company has beaten consensus estimates in three straight quarters, with the most recent surprise coming in at 37%, followed by beats of 23% and 14% — a pattern of consistent and widening outperformance against analyst expectations.
→StableEarnings
- Expectation
- EPS surprise stays above 10% in each of the next 2 reported quarters, sustaining the recent beat pattern.
CounterThe quarter before the three-quarter beat streak was an in-line result at 5%, suggesting the cadence can be interrupted; if the most recent 37% beat was driven by a lumpy order cycle rather than structural demand, the next quarter may see a sharp normalization.
With only 4.1% upside to the analyst-derived target and a reward-to-risk of 0.59-to-1 — the downside to the stop outweighs upside by nearly two-to-one — the current setup does not offer sufficient asymmetry to justify initiating or adding to a position.
→StableEngine gate (failed)
- Expectation
- This pillar is falsified if the stock pulls back to a level establishing reward-to-risk above 1.5-to-1 or if analyst targets are raised above $75, opening more than 12% of headroom.
CounterMomentum is softly positive — above the 200-day moving average with rising OBV — and a further strong earnings print could catalyze an analyst target upgrade that shifts the risk/reward quickly.
Per-dimension breakdown
Quality
7.4/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.2 |
| ROA | 4.2 |
| Gross margin | 9.6 |
| Op margin | 8.9 |
| Net margin | 6.8 |
| Current ratio | 9.4 |
| FCF quality | 9.2 |
| Moat | 6.4 |
| Rule of 40 | 7.2 |
| Piotroski F | 8.9 |
- ▸Excellent cash conversion: 127% FCF/NI
- ▸Rule of 40: 42 (pass)
- ▸Strong Piotroski F-Score: 8/9
Growth
9.3/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 8.6 |
| EPS growth | 10.0 |
- ▸Strong growth: 24% YoY
Momentum
3.7/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 3.1 |
| OBV | 1.0 |
| MA position | 9.0 |
| Volume | 0.0 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.5 |
| Price target | 7.1 |
| erm sentiment | 5.4 |
Insider
3.4/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 3.0 |
| insider conviction | 2.0 |
| holder change | 5.1 |
- ▸Notable insider selling — $14,975,630 (0.141% of mkt cap)
Peer rank
3.8/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 1.8 |
| quality rank | 5.4 |
| growth rank | 7.9 |
Technical
4.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.8 |
| support resistance | 2.0 |
| 52w position | 8.5 |
| gap | 5.0 |
Risk (lower is worse)
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.1 |
| days to cover | 8.9 |
| volatility | 0.5 |
| put call | 7.3 |
| implied vol | 4.3 |
| max pain risk | 7.0 |
| beta | 5.0 |
| debt equity | 0.0 |
Catalyst
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 5.2 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 53.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:34d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:3.7<4.5
- ASYMMETRY:0.3<1.5@spot
Warning (0)
none
Reward-to-Risk
0.29
Upside
+3.5%
Downside
12.4%
Sizing output
AVOID
SetupUNKNOWN — No clear chart pattern; technical signals are mixed
EdgeNO_EDGE — No clear edge identified
SuitabilityAGGRESSIVE — Beta 1.51>1.3
Investment implication
The F-path SELL output reflects an overall score of 4.2 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Growth at 9.3) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:3.7<4.5, ASYMMETRY:0.3<1.5@spot) reinforce the read. Current asymmetry R:R is 0.29 — supplementary context, not the trigger for this path.
The strongest dimensions are Growth at 9.3, Quality at 7.4, and Catalyst at 7.0; the weakest are Insider at 3.4, Momentum at 3.7, and Peer rank at 3.8. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 0.29 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1The company has beaten consensus estimates in three straight quarters, with the most recent surprise coming in at 37%, followed by beats of 23% and 14% — a pattern of consistent and widening outperformance against analyst expectations.
Trip ifEPS surprise falls below 0% for 2 consecutive quarters.
- P2Free cash flow is running at 127% of net income — meaning the business generates more cash than it reports as earnings — and the Rule of 40 score of 42 (passing the threshold) reflects a software-oriented business model converting growth into durable cash.
Trip ifFree cash flow falls below 80% of net income for 2 consecutive reported quarters.
- P3Revenue is growing at roughly 24% year-over-year, earning the company a leading position in its peer group on the growth dimension and supporting the premium multiple the market is currently applying.
Trip ifRevenue growth falls below 15% year-over-year for 2 consecutive quarters.
- P4A forward price-to-earnings of 37.4x — significantly above the sector average — prices in sustained strong growth with no room for execution missteps; even a modest guidance reduction could produce a disproportionate multiple compression.
Trip ifForward P/E compresses below 28x as earnings estimates are revised upward by more than 15%.
- P5With only 4.1% upside to the analyst-derived target and a reward-to-risk of 0.59-to-1 — the downside to the stop outweighs upside by nearly two-to-one — the current setup does not offer sufficient asymmetry to justify initiating or adding to a position.
Trip ifStock pulls back to a level where reward-to-risk exceeds 1.5-to-1 with analyst target above $75.