Cognex Corporation (CGNX): what the price assumes

In the published model solve dated 2026-Q2, anchored at $62.26, Cognex Corporation (CGNX) is priced for today's economics sustained for ~13.6 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/CGNX

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 11.6% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.1%); the inversion above states its own rate.

Per-Model Detail (n=18)

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Gross margin reached 71% in the first quarter of 2026 against 67% a year earlier, and operating income moved to 22% of revenue from 12%, which is what happens when a company sells cameras whose real content is decades of software.
• Cognex sells to capital-spending committees, and the 10-K is direct about what that means: slower growth, higher rates or tighter credit may cause companies to delay or reduce spending for automation projects, a sensitivity that showed up as continued automotive weakness through 2025.
• Second-quarter results land on August 5, 2026, and the number that matters is whether the end-market mix that produced the first quarter's margin still holds.

Bull Case

A machine vision system is a camera bolted to a factory line. The camera is a commodity. What is not a commodity is the software that looks at the image and decides, in a few milliseconds and without a human, whether the part in front of it is right. That distinction is the whole moat, and it shows up in a single line of the latest quarterly filing: Gross margin was 71% for the three-month period in 2026 as compared to 67% for the same period in 2025, the improvement attributed to more favorable end-market mix and higher sales volume. For scale, TRMB files a gross margin of 69.5% and TER 58.7%, and both are well-run businesses. Cognex is selling code with a lens attached.

The company describes itself in the 10-K as a global technology leader in industrial machine vision systems, which is the kind of self-description every filer writes. The interesting part is what it is spending to stay there. Management states that a continued commitment to RD&E activities is essential to maintain or achieve product leadership and points to a move toward a unified software architecture across product lines. That architecture is the thing a customer gets locked into. A plant that has trained its engineers on one vision toolkit, written its inspection routines against it, and validated those routines with a regulator does not casually re-platform to save a few thousand dollars a station.

Then there is operating leverage, which for this business is unusually violent. Full-year 2025 saw operating income rise to 16% of revenue in 2025 compared to 13% of revenue in 2024 due to the leverage achieved from revenue growth on lower operating expenses, with net income of $0.68 per share for the year against $0.62 the year before. The first quarter of 2026 took that further, the 10-Q reporting that Operating income increased to 22% of revenue for the first quarter of 2026 as compared to 12% of revenue for the first quarter of 2025, on revenue up 21% before currency effects, with the increase attributed to broad-based demand across consumer electronics, semiconductor and other major end markets. When most of each incremental sales dollar survives the cost of goods, and the cost base underneath is largely salaried engineers, growth arrives at the operating line nearly intact.

The demand side has a slow, regulatory-shaped tailwind behind it. The 10-K argues that growth in packaging will be driven by increasingly stringent regulations around traceability, quality, and compliance, which is the sort of driver that does not care much about the business cycle. Somebody has to read the code on the box. Machine vision is how that gets done at line speed.

Capital allocation is unglamorous and consistent with the story. The board authorized a $500,000,000 repurchase program in March 2022, described in the filing as intended in part to offset dilution from employee stock awards, and the share count has fallen at roughly 1.2% a year over the four years to April 2026. There are no funded borrowings against the business. Total contractual obligations disclosed for the end of 2025 came to 93.4 million dollars, of which 15.8 million falls due within twelve months, set against $187.2M of trailing operating income. Whatever the bear argument turns out to be, and there is a real one, it is not an argument about whether this company survives a bad year.

Bear Case

The most candid competitive warning about Cognex is written by Cognex. The 10-K states that large technology companies and other competitors with substantial financial and technological resources may continue to develop and distribute free or low-cost solutions, and that the risk is to our ability to differentiate our products on performance or features. Read that slowly. The company's moat is a proprietary algorithm sold at a gross margin most hardware makers never approach, and the disclosed threat is that general-purpose vision models, trained by firms with vastly larger research budgets and given away to seed a platform, make "good enough" free. That is not a distant hypothetical in a field where the underlying technique has moved from hand-tuned pattern matching to trained networks in under a decade. The commodity part of the system was always the camera. The question the bear asks is whether the software is on its way to joining it.

That matters more than it normally would because of what the price assumes. At $62.06 the market is paying about 54 times company-wide operating income, which inverts to operating growth held at its self-funding ceiling for roughly 16 years. Not the growth rate: the rate is within what the business has recently delivered. It is the persistence. Of comparable fast-growers, only about 14% sustained that pace even a decade. The multiple itself sits at the very top of its peer distribution, well beyond the upper quartile. If the compounding runs six years instead of sixteen, the arithmetic does not soften gently, because each percentage point taken off the growth rate moves the required horizon by about 2.4 years in the other direction. The price would then have to find support from the earnings-power methods, which currently sit at roughly a fifth of it.

The cyclical exposure is real and recent. Full-year 2025 carried a gross margin decline that the filing attributes to a strategic product portfolio review under new leadership, reduced focus on certain legacy products with the attendant obsolescence risk, less favorable industry mix and tariffs. Revenue from customers based in Greater China fell 3% that year, and automotive weakness offset gains elsewhere. Roughly 67% of 2025 revenue came from customers outside the United States, so the reported line carries currency and trade policy along with demand. The 10-K also flags that the business experiences significant seasonal variations, with certain quarters typically generating higher revenues due to industry cycles and customer purchasing patterns, which is a caution worth holding next to a single spectacular quarter.

And the customer is the softest link in the chain. A factory-automation purchase is discretionary in timing even when it is not discretionary in principle. The filing spells it out: slower growth or recession, higher interest rates, tighter credit and labor shortages may cause companies to delay or reduce spending for automation projects. A vision system that pays back in eighteen months still gets deferred when the plant manager's capital budget is frozen, and the deferral shows up in Cognex's quarter, not the customer's.

None of this is a solvency argument, and the bear should not pretend otherwise. The company carries no funded borrowings and generates cash. The claim is narrower and harder to dismiss: sixteen years of uninterrupted compounding is being underwritten by a business whose demand arrives in cycles, whose largest single-country exposure declined last year, and whose own risk disclosure names free software as the thing that could take the margin away.

Valuation

At $62.06 on July 25, 2026, the market values the enterprise at about 54 times company-wide operating income. Run that backwards at an 11.6% cost of capital and it resolves into a duration: operating growth held at its self-funding ceiling of 25% a year for roughly 16 years. The rate is not the unusual part. Measured against what Cognex has recently delivered, that pace is inside its own recent range, and the first quarter of 2026 delivered revenue up 21% before currency effects. The unusual part is how long the price needs it to last, and the trade is steep in both directions: each percentage point off the growth assumption adds about 2.4 years to the horizon the price requires.

Two of the three reference points say the same thing about that duration. Against the sector, the multiple sits at the very top of the peer distribution, well beyond the upper quartile. Against the historical record of companies that grew this fast, only about 14% sustained the pace across a full decade. The horizon in the price is longer than that by half again.

The methods themselves split cleanly, and the split is the information. Only the forward-growth family reaches the price. Everything static falls well short: the asset-based lens sits at roughly a sixth of it, the earnings-power methods at about a fifth, and the peer-multiple family at a little under half. Nothing about that pattern is anomalous for a company whose value is a software franchise rather than a factory. Book value per share is $8.78, and a business whose main asset is code its engineers wrote will always look thin to a balance sheet method. But the way the growth models get there deserves naming. One capitalizes revenue on a terminal price-to-sales ratio held flat at today's level; the other carries today's enterprise-value-to-EBITDA ratio forward to the exit year without compressing it. Both reach the price by assuming the market's current opinion of this business is also its permanent one.

The cohort comparison sharpens it. On trailing operating margin, Cognex earns 18.5%, which places it in the middle of its comparison set rather than at the top: KEYS files 18.2%, TRMB 17.3%, MKSI 13.9%, and TER 26.5% on revenue nearly four times larger. On growth, TER filed 30.3% and KEYS 19.2%. So this is a company with peer-typical operating economics carrying a multiple that no peer carries. The premium is not being paid for demonstrated margin. It is being paid for the expectation that the margin structure and the growth rate hold together for a decade and a half, which is a claim about durability, not about the current year.

The balance sheet does what a clean balance sheet should do here, which is to remove one whole category of risk from the conversation. There are no funded borrowings. Total contractual obligations disclosed at the end of 2025 were 93.4 million dollars, of which 15.8 million falls due within twelve months, against $187.2M of trailing operating income and $142.5M of trailing net income. The share count has declined about 1.2% a year over the four years to April 2026, under the $500,000,000 repurchase program the board authorized in March 2022. Solvency is therefore not the variable in this name. Time is, and about sixteen years of it has already been spent.

Catalysts

The next scheduled information event is the second-quarter 2026 report on August 5, 2026. It matters more than a routine print because of what preceded it. For the quarter ended April 5, 2026 the 10-Q reports that Operating income increased to 22% of revenue for the first quarter of 2026 as compared to 12% of revenue for the first quarter of 2025 and that Gross margin was 71% for the three-month period in 2026 as compared to 67% for the same period in 2025, with the revenue increase attributed to broad-based demand across major end markets including consumer electronics and semiconductor. A single quarter of that shape can be mix. Two consecutive quarters start to look like the cost structure.

Sell-side positioning moved with the stock rather than ahead of it. Citi raised its price target to $72 from $68 on July 12, 2026 while keeping a Neutral rating, and Truist raised its target to $71 from $61 on July 1, 2026 while keeping a Hold. Neither house changed its rating, which is the useful detail: these are target revisions that follow a re-rated share price, not analysts arguing the business has changed.

The slower-burning item is internal. The 2025 annual filing describes a comprehensive strategic product portfolio review under a new leadership team, with a decision to reduce focus on certain legacy products that raised the risk of excess and obsolete inventory and contributed to that year's gross margin decline. The first quarter of 2026 suggests the pruning is now showing up on the favorable side of the mix. Whether that holds through a full year of comparisons is the thing to check on the August print and the one after it.

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

• KEYS (KEYSIGHT TECHNOLOGIES, INC.)
• FY2025 10-K: …technologies, software-defined vehicles, industrial IoT, digital health, and fab capacity. Revenue for EISG in 2024 decreased 12 percent compared to 2023. Acquisitions had a favorable impact of 7 percentage points on the year-over-year revenue change, while foreign currency movements had an unfavorable impact of 1…
• FY2025 10-K: …market represented approximately 67 percent of total CSG revenue in 2025 and increased 10 percent compared to 2024. Revenue increased across all regions. T he year-over-year increase was primarily driven by R&D investments in terabit solutions and expanding 400G/800G transceiver manufacturing capacity to meet rising…
• TER (TERADYNE, INC.)
• FY2025 10-K: Table of Contents Sales to customers outside the United States were 89%, 87%, and 84%, respectively, of our consolidated revenues in 2025, 2024 and 2023. Sales are attributed to geographic areas based on the location of the customer site. See also "Item 1A: Risk Factors" and Note V: "Segment, Geographic, and…
• FY2025 10-K: …the current segment structure and presentation requirements. The Semiconductor Test segment includes operations related to the design, manufacturing and marketing of semiconductor test products and services inclusive of storage and system level test products. The Robotics segment includes operations related to the…
• COHU (COHU INC)
• FY2025 10-K: …and prudent situations such as, for example, when the resulting tax benefit exceeds the costs involved to obtain such tax benefit, and the success of prevailing upon pursuing the competent authority is more-likely-than-not achievable. 11. Segment and Geographic Information We applied the provisions of ASC 280, which…
• FY2025 10-K: …increased 12.7%, year-over-year, to $453.0 million. Revenue from our capital equipment products is primarily driven by customers' capital expenditures and operating budgets, which can fluctuate significantly based on variations in their business conditions. These expenditures depend on current and anticipated market…
• ONTO (ONTO INNOVATION INC.)
• FY2025 10-K: …we have. In automated systems for the semiconductor industry, our principal competitors are KLA Corporation ("KLA") and Nova Ltd. (formerly Nova Measuring Instruments Ltd.) ("Nova") for thin film and critical dimension OCD metrology. Our principal competitors for advanced packaging inspection are KLA and Camtek Ltd.…
• FY2025 10-K: …competitors in each product area to continue to improve the design and performance of their products and to introduce new products with competitive prices and performance characteristics. These product introductions would likely require us to decrease the prices of our systems and increase the level of discounts that…
• MKSI (MKS INC)
• FY2025 10-K: …for 2025, 2024 and 2023, respectively. In any reporting period, these customers may contribute an even larger percentage of our consolidated net revenues. The loss of any of these customers or a significant reduction in orders by these customers, including due to economic, market or competitive conditions, regulatory…
• FY2025 10-K: …harmed. We operate in highly competitive markets characterized by rapid technological advances, frequent product introductions and enhancements, changing customer requirements, evolving industry standards, substantial capital investment and increasing price pressure. Our success depends upon our ability to…
• TRMB (TRIMBLE INC.)
• FY2025 10-K: …(b) the recognition of an additional week of subscription and services revenue in the fourth quarter of 2024, resulting from the 53-week year. For the total Company, the organic impact of the software renewals and additional week in 2024 was an approximate 2% negative impact on revenue growth for 2025. Total organic…
• FY2025 10-K: …Science's expanded business with an approximate fair value of $253.9 million . The transaction aims to enhance driver experience, fleet safety, efficiency, and compliance by combining two cutting-edge in-cab commercial vehicle ecosystems, which gives customers access to more applications and offerings. In addition,…
• COHR (COHERENT CORP.)
• FY2025 10-K: …and display capital equipment verticals in the industrial end market. Gross margin. Gross margin for the year ended June 30, 2024 was $1,456 million, or 31%, of total revenues, compared to $1,618 million, or 31% of total revenues, for fiscal 2023, a slight decrease of 43 basis points. During fiscal 2023, the Company…
• FY2025 10-K: …revenue increased $40 million year-over-year reflecting higher volumes of annealing lasers in our display capital equipment market partially offset by continued soft demand in precision manufacturing. Materials decreased $63 million year-over-year, primarily due to softness in the Silicon Carbide business. Gross…
• ITRI (Itron, Inc.)
• FY2025 10-K: …to the CODM. We do not manage the performance of the segments on a balance sheet basis. Other income (expense) primarily includes interest income, interest expense, and amortization of prepaid debt fees. The CODM assesses the segments' performance primarily by using each segment's adjusted operating income,…
• FY2025 10-K: …innovative new technology for critical infrastructure in electricity, natural gas, water, heat, smart city, and DERMs verticals. This includes endpoints, sensing and control devices, data collection software, communication technologies, data warehousing, software applications, and the IIoT. We invested approximately…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.