The fourth industrial revolution is a key driver of growth for these three high-powered stocks in 2021…
Machine vision leader Cognex (NASDAQ:CGNX), industrial software company PTC (NASDAQ:PTC), and engineering simulation and design software company ANSYS (NASDAQ:ANSS) are companies in a hurry. All three are leaders in high-growth industries that have seen interest in their solutions increase as a result of the COVID-19 pandemic. Consequently, investors have every reason to believe their growth could accelerate in the coming years. Here’s why.
Cognex’s machine vision solutions make it a major beneficiary of the trend toward automation in manufacturing and logistics. Using machine vision is a lot more accurate and cost effective than using humans to perform the same task. In a nutshell, digital sensors are placed in cameras in order to capture images that are then analyzed to guide, monitor, and control automated processes.
Consequently, Cognex’s current key industries are the early adopters of automation, such as automotive and consumer electronics. Apple is Cognex’s largest customer, using Cognex’s systems to inspect and monitor the layering of screens on iPhones. The company should see strong growth as wide-scale adoption of automation spreads into other industries like logistics (e-commerce facilities, etc.), life sciences, food and beverage, airport baggage handling, and packaging.
Management sees Cognex having a 20% share of a served market (see chart below) of around $4.2 billion which is growing at a 12% annual rate over the long term. Wall Street analysts see a combination of end market and market share growth leading to $1 billion in sales and $1.44 in EPS in 2022.
Those figures would put Cognex at a 2022 price-to-sales multiple of 15 times and a P/E ratio of 59 times earnings. Frankly, those ratings look very rich to me, but all it will take is a few big deals — such as the transformative Apple partnership — and investors will be scrambling to increase their earnings estimates.
Cognex tends to generate major deals in the second and third quarters, so look out for any guidance in the matter on the first-quarter earnings call, usually held toward the end of April.
PTC, an industrial software company, divides its revenue streams into core and growth offerings. The core offerings are its traditional computer-aided design (CAD) and…
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