COGNEX CORP (CGNX) stock intrinsic value fair value estimate & owner earnings analysis

Cognex makes industrial machine vision: cameras, smart sensors, deep-learning software and barcode readers that let factories and warehouses locate, inspect, identify and measure what they make and ship. Its customers are logistics and e-commerce operators, consumer electronics makers, automotive and battery plants, packaging and semiconductor companies, and since the 2023 purchase of Japan's Moritex it also sells optical components. It has no borrowings at all, and held about $755 million of cash and investments at July 2026 (roughly $4.44 a share), of which we treat about $100 million as working cash and credit the rest, about $3.85 a share, to every case. What the business earns. We measure owner earnings as the cash the operations produce, ignoring swings in inventory, receivables and payables, after paying for stock compensation as a real cost and after the capital spending needed to keep the business where it is. On that basis Cognex earned, per share: 2016 $0.83, 2017 $0.96, 2018 $1.15, 2019 $0.65, 2020 $1.25, 2021 $1.64, 2022 $1.39, 2023 $0.59, 2024 $0.63, 2025 $1.11. These figures tie exactly to net income plus depreciation and other non-cash items in every year. Two things to know: the 2019 figure is depressed by a one-time deferred tax item, and the 2022 figure adds back a $46 million non-cash loss from a fire at the company's Indonesian contract manufacturer. Amortization of acquired intangibles is small (about $10 million a year), so treating it as a non-cash charge does not flatter the picture. The series is a full cycle. Machine vision demand comes in waves driven by a few industries' capital budgets: consumer electronics model changeovers (2017 boom, 2019 bust) and the e-commerce warehouse build-out (2020-2022 boom, 2023-2024 bust, when logistics revenue fell about 21% and consumer electronics about 31% in a single year). We anchor on the median of all ten years, about $1.04 a share, then trim it to roughly $0.97 because those earnings include interest on the cash pile that we credit separately. Gross margin has fallen from 73% in 2021 to 67% in 2025, partly from the lower-margin Moritex business and tariffs, and stock compensation has grown faster than revenue, so although revenue nearly doubled since 2016, owner earnings per share grew only about 3% a year. Recent results. The first half of 2026 was strong: revenue $560 million versus $465 million, operating income $145 million versus $70 million, and cash generation after stock pay and capital spending of about $87 million versus $56 million. Owner earnings rose 77% in 2025. We let this lift the first year of each case (base $1.30, bull $1.45, bear $1.15) but do not move the long-run level on it: 2025 included $13 million of one-time partnership revenue, and one e-commerce customer grew to 15% of revenue from under 10% two years earlier, which is exactly the customer type that stopped ordering in 2023. After year one, growth in every case is at or below the decade's demonstrated rate rather than 2025's 77% rebound. Base case ($24.14). Year one at $1.30, then back to about $1.00 and growing about 2.5% a year, the rate the business has actually compounded owner earnings per share over the last decade (helped by buybacks), with one cyclical dip of about a quarter in each decade of the story, tapering to no growth by year twenty and continuing beyond that on the strength of a 40-year franchise, about $140 million a year of R&D and a leading installed base. The operating business is worth about $20.29 a share; it owes nothing and holds $3.85 a share of surplus cash, so the shares are worth about $24.14. Only the demonstrated long-run growth rate is credited; we give no credit to ambitions in logistics, AI-based inspection or new markets, because those are hopes rather than secured volumes. Bear case ($16.99). Earnings settle at $0.90, below the median, as gross margin stays compressed and the large e-commerce customer normalizes down, with no growth. It includes a repeat of the 2023-2024 downturn in years two and three (owner earnings to about $0.50 a share, the level actually reached in 2023-2024 once interest income is set aside), a smaller dip in year eight and another full downturn in years eleven and twelve, and after year ten earning power erodes about 1.5% a year as lower-cost Asian vision suppliers take share. The business is worth about $13.14 a share, it owes nothing, and with surplus cash the shares are worth about $16.99. The debt-free balance sheet means a downturn costs earnings, not ownership. Bull case ($31.44). The 2025-2026 recovery holds at a higher level of about $1.15 after a strong first year, growing about 4% a year (the pace of the better stretches of the past decade) and fading to zero by year twenty, still with a downturn in each decade. The business is worth about $27.59 a share and the shares about $31.44 with cash. Margin-of-safety price ($14.50). How sure are we of the earnings level? Moderately. Ten years of figures cover two full booms and busts and the median is about $1.00, but the annual results run from $0.59 to $1.64 and margins have trended down. The worst plausible outcome is a long stretch like 2023-2024 that does not snap back, with consumer electronics production shifting to suppliers that use cheaper Asian vision systems and the big e-commerce customer building more in-house; that would leave earnings near $0.60 for years. The structure survives it easily: no debt, $755 million of cash and investments, and a dividend and buyback funded from cash. If we are wrong about the two things we are most likely to be wrong about (normal earnings nearer $0.80 than $1.00, and no growth at all), the shares would be worth roughly $17 to $18, still above the margin-of-safety price. From $14.50, the base case's move to the roughly $24 base value within about three years, plus a dividend of about $0.34 a share a year, implies about 20% a year; and if the wrong-case outcome is the truth, the price still sits below what the business is worth, so that outcome implies a slower return rather than a permanent loss. Above about $15 that cushion disappears, which is why the margin-of-safety price is $14.50. What changed since our previous analysis. Our measure of owner earnings now strips out working-capital swings and separates growth from maintenance spending, so the previous figures are not comparable. In the business itself, the first-half 2026 results confirm the recovery from the 2023-2024 trough is real, which supports a somewhat higher earnings level than we used before, while the growing reliance on one large customer and the continued slide in gross margin keep the downside meaningful.