Should You Think About Buying Cognex Corporation (NASDAQ:CGNX) Now?

Cognex Corporation (NASDAQ:CGNX), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$50.98 at one point, and dropping to the lows of US$41.45. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Cognex's current trading price of US$42.93 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Cognex’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Cognex

Is Cognex Still Cheap?

According to my valuation model, Cognex seems to be fairly priced at around 16.98% above my intrinsic value, which means if you buy Cognex today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $36.70, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Cognex’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Cognex look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Cognex's earnings over the next few years are expected to increase by 40%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? CGNX’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on CGNX, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Diving deeper into the forecasts for Cognex mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in Cognex, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.