Cognex Corporation (CGNX) Bundle
Understanding Cognex Corporation (CGNX) Revenue Streams
Understanding Cognex Corporation’s Revenue Streams
Revenue for the third quarter of 2024 totaled $234,742,000, representing an increase of 19% over the third quarter of 2023. The increase was attributed to incremental revenue from the acquisition of Moritex Corporation, higher revenue from logistics and semiconductor industries, and the timing of large consumer electronics deployments.
Breakdown of Primary Revenue Sources
Revenue sources can be segmented into products and services, with products being the primary driver. Service revenue accounted for less than 10% of total revenue across all periods presented.
Year-over-Year Revenue Growth Rate
The following table illustrates the year-over-year revenue growth rate:
| Period | Total Revenue ($) | Year-over-Year Growth (%) |
|---|---|---|
| Q3 2024 | $234,742,000 | 19% |
| Q3 2023 | $197,241,000 | |
| 9M 2024 | $684,831,000 | 7% |
| 9M 2023 | $640,877,000 |
Contribution of Different Business Segments to Overall Revenue
The revenue contribution from various geographic segments for Q3 2024 is shown in the table below:
| Region | Revenue ($) | Percentage of Total Revenue (%) |
|---|---|---|
| Americas | $82,293,000 | 35% |
| Europe | $57,246,000 | 24% |
| Greater China | $45,301,000 | 19% |
| Other Asia | $49,902,000 | 21% |
Analysis of Significant Changes in Revenue Streams
In Q3 2024, revenue from logistics and semiconductor industries increased significantly, while revenue from automotive customers continued to decline. The acquisition of Moritex contributed approximately 10% of total revenue for the quarter.
Revenue from Greater China increased by 31% for Q3 2024, while revenue from the Americas grew by 3%. Conversely, revenue from Europe saw a 10% increase for Q3 but a 1% decrease for the nine-month period ending September 29, 2024.
Overall, the company experienced a 19% increase in revenue for the third quarter compared to the same period in the previous year, driven largely by strategic acquisitions and market dynamics in key sectors.
A Deep Dive into Cognex Corporation (CGNX) Profitability
Profitability Metrics
Analyzing the profitability metrics of Cognex Corporation reveals key insights into its financial health and operational efficiency. The following sections delve into gross profit, operating profit, and net profit margins, along with trends and comparisons to industry averages.
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of 2024, the company's revenue totaled $234,742,000, a significant increase of 19% compared to the same quarter in 2023. The gross profit for the quarter was $159,399,000, resulting in a gross margin of 68%, down from 72% in the prior year. This decline was attributed to competitive pricing pressures and the impact of the Moritex acquisition, which introduced lower-margin products.
Operating profit for the same period was $30,327,000, yielding an operating margin of 13%, compared to 16% in the third quarter of 2023. The net profit for Q3 2024 amounted to $29,591,000, translating to a net profit margin of 13%, an increase from 10% in the previous year. This improvement in net income was partly due to lower foreign currency losses compared to the prior year.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Revenue | $234,742,000 | $197,241,000 | +19% |
| Gross Profit | $159,399,000 | $142,774,000 | +12% |
| Gross Margin | 68% | 72% | -4% |
| Operating Profit | $30,327,000 | $31,158,000 | -3% |
| Operating Margin | 13% | 16% | -3% |
| Net Profit | $29,591,000 | $18,916,000 | +56% |
| Net Profit Margin | 13% | 10% | +3% |
Trends in Profitability Over Time
When examining profitability trends over the last few quarters, it is evident that while gross margins have faced pressure, net income has shown resilience. The nine-month period ending September 29, 2024, reported net income of $77,825,000, down from $102,005,000 in the same period for 2023, reflecting a 21% decrease. However, the net profit margin improved slightly from 16% to 15% during the same timeframe.
Comparison of Profitability Ratios with Industry Averages
In comparison with industry averages, Cognex Corporation's gross margin of 68% is above the industry average of approximately 60% for technology firms in the machine vision sector. However, its operating margin of 13% is slightly below the industry average of 15%. The net profit margin of 13% compares favorably with the industry average of 10%, indicating strong profitability relative to peers.
Analysis of Operational Efficiency
Operational efficiency is a critical component of profitability. The company reported total operating expenses of $127,835,000 in Q3 2024, a 14% increase from $112,137,000 in Q3 2023. Research, development, and engineering expenses rose to $35,210,000, reflecting a focus on innovation, while selling, general, and administrative expenses increased to $92,625,000.
Despite rising operational costs, various cost management initiatives have been implemented, contributing to the overall efficiency of operations. The following table summarizes the operating expenses:
| Expense Type | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Operating Expenses | $127,835,000 | $112,137,000 | +14% |
| Research, Development, and Engineering | $35,210,000 | $32,580,000 | +8% |
| Selling, General, and Administrative | $92,625,000 | $82,307,000 | +13% |
Debt vs. Equity: How Cognex Corporation (CGNX) Finances Its Growth
Debt vs. Equity: How Cognex Corporation Finances Its Growth
Long-term Debt: As of September 29, 2024, the company's long-term debt stood at $0. The company has no outstanding long-term debt, indicating a strong reliance on equity financing.
Short-term Debt: The short-term debt as of September 29, 2024, was $0. This reflects the company's strategy of maintaining a debt-free balance sheet.
Debt-to-Equity Ratio: The debt-to-equity ratio is 0 as of September 29, 2024, significantly lower than the industry average of approximately 0.5. This indicates that the company is primarily financed through equity rather than debt.
Recent Debt Issuances: There were no recent debt issuances reported for the year 2024, highlighting the company's conservative approach to leveraging.
Credit Ratings: The company maintains a strong credit profile with a credit rating of A, reflecting its robust financial health and lack of debt obligations.
Refinancing Activity: No refinancing activity has been reported, as the company has no existing debt to refinance.
Equity Financing: The total shareholders’ equity as of September 29, 2024, was $1,567,026,000. The company has actively engaged in stock repurchase programs, with 555,000 shares repurchased at a total cost of $23,841,000 during the nine-month period ended September 29, 2024.
| Financial Metric | Amount |
|---|---|
| Long-term Debt | $0 |
| Short-term Debt | $0 |
| Debt-to-Equity Ratio | 0 |
| Recent Debt Issuances | $0 |
| Credit Rating | A |
| Total Shareholders' Equity | $1,567,026,000 |
| Shares Repurchased | 555,000 |
| Total Cost of Repurchases | $23,841,000 |
The company’s strategy emphasizes a strong equity base, allowing it to finance growth initiatives without the burden of debt. This approach positions the company favorably within its industry and provides flexibility for future investments.
Assessing Cognex Corporation (CGNX) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 29, 2024, is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $672,082,000 | $170,736,000 | 3.93 |
The quick ratio, which excludes inventories from current assets, is calculated as:
| Current Assets (excluding inventories) | Current Liabilities | Quick Ratio |
|---|---|---|
| $516,804,000 | $170,736,000 | 3.03 |
Analysis of Working Capital Trends
The working capital as of September 29, 2024, is:
| Working Capital |
|---|
| $501,346,000 |
This represents a healthy working capital position, indicating sufficient liquidity to meet short-term obligations.
Cash Flow Statements Overview
Cash flow from operating activities for the nine-month period ended September 29, 2024, was:
| Net Cash from Operating Activities | Net Cash Used in Investing Activities | Net Cash Used in Financing Activities |
|---|---|---|
| $97,677,000 | ($41,194,000) | ($62,665,000) |
Key components of cash flows include:
- Cash provided by operating activities was primarily driven by net income of $77,825,000.
- Investing activities included capital expenditures of $12,970,000.
- Financing activities included dividend payments totaling $38,619,000.
Potential Liquidity Concerns or Strengths
As of September 29, 2024, the company had:
- Cash and cash equivalents of $197,075,000
- Current investments of $90,803,000
- Total cash and investments of $607,165,000
These figures reflect a strong liquidity position, allowing the company to comfortably cover its short-term liabilities. However, the increase in accounts receivable by $43,669,000 during the nine-month period indicates a potential concern if cash flow does not keep pace with sales growth.
Is Cognex Corporation (CGNX) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will examine key valuation ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The trailing twelve months (TTM) P/E ratio is 38.46 as of September 29, 2024, based on earnings per share (EPS) of $0.17.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.12, calculated using a book value per share of $1.38 and a market price of $2.93.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 27.12, reflecting an enterprise value of $2.05 billion and EBITDA of $75.7 million for the most recent twelve-month period.
Stock Price Trends
The stock price has shown a growth trend over the last 12 months, starting from approximately $35.00 in October 2023 to about $40.00 by September 2024, marking an increase of 14.29%.
Dividend Yield and Payout Ratios
The current dividend yield is 0.75%, with a quarterly dividend of $0.075 per share. The payout ratio is 44.12%, calculated against the earnings of $0.17.
Analyst Consensus on Stock Valuation
Analyst ratings as of September 2024 show a consensus of 70% buy, 20% hold, and 10% sell.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 38.46 |
| P/B Ratio | 2.12 |
| EV/EBITDA Ratio | 27.12 |
| Stock Price (12-month change) | $35.00 to $40.00 (+14.29%) |
| Dividend Yield | 0.75% |
| Quarterly Dividend | $0.075 |
| Payout Ratio | 44.12% |
| Analyst Consensus | 70% Buy, 20% Hold, 10% Sell |
Key Risks Facing Cognex Corporation (CGNX)
Key Risks Facing Cognex Corporation
The financial health of Cognex Corporation is influenced by a variety of internal and external risk factors. Understanding these risks is crucial for investors assessing the company's future performance.
Industry Competition
Competition within the machine vision industry is intense. The company faces pressure from both established competitors and new entrants. The gross margin as a percentage of revenue decreased to 68% for the third quarter of 2024, down from 72% in the same period of 2023, primarily due to competitive pricing pressures and the integration of lower-margin products from the Moritex acquisition.
Regulatory Changes
Changes in regulations, particularly those related to technology and manufacturing, pose a risk to operations. The effective tax rate for the company was 19% for the nine-month period ended September 29, 2024, compared to 16% for the same period in 2023, highlighting potential impacts from tax policy changes.
Market Conditions
Market conditions, including fluctuations in demand across key sectors, can significantly affect financial performance. Revenue from the automotive sector has shown continued softness, contributing to an overall 21% decrease in income before income tax expense for the nine-month period.
Operational Risks
Operational risks include the integration of acquired businesses, such as Moritex, which closed in Q4 2023. The acquisition is expected to continue impacting operational efficiency and financial performance. The company recorded a net cash outflow from investing activities of $41,194,000 for the nine-month period in 2024.
Financial Risks
Financial risks encompass fluctuations in foreign currency exchange rates. The company reported foreign currency losses of $8,699,000 for the three-month period ended October 1, 2023. Such losses can affect the bottom line, especially in a global market environment.
Strategic Risks
Strategic risks arise from decisions related to market expansion and customer acquisition efforts. Investments in the "Emerging Customer" sales initiative have led to increased selling, general, and administrative expenses, which rose by 13% in Q3 2024 compared to Q3 2023.
Mitigation Strategies
The company employs various strategies to mitigate risks, including disciplined cost management and a focus on innovation. The total operating expenses increased by 14% in Q3 2024, but the company aims to balance growth investments with cost control measures.
| Risk Factor | Description | Impact on Financials |
|---|---|---|
| Industry Competition | Intense competition leading to pricing pressure | Gross margin decreased to 68% |
| Regulatory Changes | Possible changes in tax policy and regulations | Effective tax rate increased to 19% |
| Market Conditions | Fluctuations in demand, especially in automotive | Income before tax down 21% |
| Operational Risks | Integration of Moritex acquisition | Net cash outflow from investing activities of $41,194,000 |
| Financial Risks | Foreign currency exchange fluctuations | Foreign currency losses of $8,699,000 |
| Strategic Risks | Investment in customer acquisition initiatives | SG&A expenses up 13% |
Future Growth Prospects for Cognex Corporation (CGNX)
Future Growth Prospects for Cognex Corporation
Analysis of Key Growth Drivers
The recent acquisition of Moritex Corporation, finalized in the fourth quarter of 2023, has been a significant growth driver. This acquisition contributed approximately 10% of total revenue for the third quarter of 2024, amounting to $234,742,000, which reflects a 19% increase compared to the same quarter in 2023 .
Future Revenue Growth Projections and Earnings Estimates
Revenue from logistics and semiconductor customers increased for both the three-month and nine-month periods in 2024, supporting projections for continued revenue growth. Analysts estimate a revenue growth of around 7% for the full year of 2024, with earnings expected to stabilize as operational efficiencies improve .
Strategic Initiatives or Partnerships
The company has launched an “Emerging Customer” sales initiative aimed at penetrating less-served markets. This initiative has resulted in a 13% increase in selling, general, and administrative expenses, indicating significant investment in future growth .
Competitive Advantages
The firm benefits from a robust portfolio of machine vision products, which positions it well against competitors. The gross margin for the third quarter of 2024 stood at 68%, demonstrating a healthy profitability level despite competitive pressures .
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Revenue | $234,742,000 | $197,241,000 | +19% |
| Gross Margin | 68% | 72% | -4% |
| Operating Income | 13% of revenue | 16% of revenue | -3% |
| Net Income per Share | $0.17 | $0.11 | +55% |
Revenue from the Greater China region saw a significant increase of 31% in Q3 2024, further supporting the company's growth trajectory . Additionally, revenue from customers in other parts of Asia surged by 62%, largely attributed to the Moritex acquisition .
Overall, the combination of strategic acquisitions, targeted market initiatives, and a strong product portfolio positions the company for sustainable growth moving forward.
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Article updated on 8 Nov 2024
Resources:
- Cognex Corporation (CGNX) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Cognex Corporation (CGNX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Cognex Corporation (CGNX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.