Automation enabler Cognex (CGNX) has continued its rally from the March panic lows, as investors warm to the idea that the COVID-19 recession won't linger on as long as feared and that short-cycle end-markets like autos will recover strongly. Add in the strong growth potential of automation in the logistics/warehouse market and the perception of Cognex as a play on onshoring/reshoring, and the shares have continued to perform well, though the spread relative to the overall industrial sector over the last three months hasn't been as wide as you might imagine.
My issue with Cognex remains the valuation and the strength of the recovery already priced into the shares. I have no problem with a low-to-mid teens long-term revenue growth rate and long-term FCF margins in the 30%s, but even those assumptions aren't enough to drive a particularly attractive fair value here. While I realize Cognex is a well-liked name with key automation-enabling technology (and a space that's somewhat hard to invest in), and I likewise realize that exceptional companies aren't bound by normal valuation rules, I'm just not eager to pay this much of a premium even if it is for an exceptional industrial growth idea.
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