Stock Analysis

Return Trends At Cognex (NASDAQ:CGNX) Aren't Appealing

  •  Updated
NasdaqGS:CGNX
Source: Shutterstock

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Cognex (NASDAQ:CGNX) looks decent, right now, so lets see what the trend of returns can tell us.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Cognex is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.17 = US$315m ÷ (US$2.0b - US$189m) (Based on the trailing twelve months to December 2021).

Thus, Cognex has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 10% generated by the Electronic industry.

View our latest analysis for Cognex

roce
NasdaqGS:CGNX Return on Capital Employed March 7th 2022

In the above chart we have measured Cognex's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For Cognex Tell Us?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 17% for the last five years, and the capital employed within the business has risen 86% in that time. 17% is a pretty standard return, and it provides some comfort knowing that Cognex has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

What We Can Learn From Cognex's ROCE

The main thing to remember is that Cognex has proven its ability to continually reinvest at respectable rates of return. Therefore it's no surprise that shareholders have earned a respectable 77% return if they held over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

Cognex could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

While Cognex isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

What are the risks and opportunities for Cognex?

Cognex Corporation provides machine vision products that capture and analyze visual information in order to automate manufacturing and distribution tasks worldwide.

View Full Analysis

Rewards

  • Earnings are forecast to grow 13.85% per year

Risks

No risks detected for CGNX from our risks checks.

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report