# Cognex: record margins, a new robotics bet and a price that already assumes the Bull case CGNX, NASDAQ. Published September 25, 2026. Price as of the September 24, 2026 regular session close. ## Verdict: HOLD at $57.70 (watchlist for new money) Watchlist for new money. Cognex is a high-quality machine vision leader in a strong recovery, but the shares trade about 26% above the Base value. Industrial cyclicality and the unproven RealSense acquisition call for a 35% margin of safety, which puts the buy zone at $29.84 or below. - Bear value: $35.03 - Base value: $45.90 (downside 20.4%) - Bull value: $65.76 - Expected value (25/50/25 weighting): about $48.15 - Required margin of safety: 35% - Maximum buy price: $29.84 - Normalized EBITDA implied by the price at 20x: about $478 million (Base $390 million) - Dividend yield: about 0.6% - Business quality: 82/100 - Valuation score: 36/100 - Confidence: 20/25, grade B Cognex makes the cameras, sensors and AI software that let factories and warehouses see: reading barcodes, inspecting parts and guiding machines. After a two-year industrial slump, it just posted record revenue and a 32% adjusted EBITDA margin, and it is buying Intel's former RealSense depth camera business to move into robotic perception. The business is excellent. The price already pays for the optimistic version of the story. At $57.70 on September 24, 2026, the shares trade 25.7% above my triangulated Base value of $45.90, a downside of 20.4% to Base. The Bear value of $35.03 is 39.3% below the price. The required margin of safety of 35% puts the maximum buy price at $29.84. For existing holders this is a hold. For new money it is a watchlist name. Route: SF-13 Industrials and manufacturing, industrial machine vision and AI-enabled automation. Economic classification: Quality Growth (8/12, raw 9/12, capped for cyclicality and the unintegrated acquisition). Primary method: normalized EV to EBITDA. Secondary methods: normalized free cash flow after stock compensation, and a historical reference. Values are present fair-value estimates, not 12-month price targets. ## What Cognex is Cognex sells machine vision systems, sensors, barcode readers and software used in factory automation and logistics. Gross margins around 70% look software-like, but demand follows industrial capital spending, so industrial multiples apply, not software multiples. Revenue fell from about $1.04 billion in 2021 to about $838 million in 2023 before recovering to about $994 million in 2025, which proves the business is cyclical. On September 22, 2026, Cognex agreed to buy RealSense for about $500 million in cash, plus a $56.5 million three-year retention program and about $50 million of restricted stock. RealSense makes depth cameras for robots and expects $80 to $90 million of 2026 revenue, growing more than 50%. Management sizes its market at about $600 million today and $1.6 billion by 2030. It is a sensible strategic move toward physical AI, but its returns are not yet proven. ## The latest quarter | Q2 2026 (to July 5, 2026) | Result | | --- | --- | | Revenue | $291.3 million, a record, up 17% | | Gross margin / adjusted gross margin | 70.6% / 71.5% | | Operating margin / adjusted EBITDA margin | 29.4% / 32.2%, up 1,150 basis points, the eighth straight quarter of expansion | | Adjusted EBITDA | $93.7 million, up 81% | | GAAP / adjusted EPS | $0.43 / $0.45, up 80% | | Free cash flow | $68 million, up 70%; first-half operating cash flow $114.2 million | Operating expenses fell 3% while revenue rose 17%, a clear display of operating leverage. Logistics grew double digits for the tenth quarter in a row. 2026 consensus is about $1.15 billion of revenue, $352 million of EBITDA and $285 million of free cash flow. The shares traded near $69 after the Q2 report and have fallen about 17% since, partly around the RealSense announcement. ## Cash quality and stock compensation Q2 free cash flow was 93% of GAAP net income and 89% of adjusted net income. Cash quality is strong. Cognex's adjusted EBITDA does not add back stock compensation, so it needs no adjustment. Free cash flow, however, is before stock compensation, which ran at about $46 million in research and selling expenses in 2025. With the new RealSense stock grants, about $60 million a year is deducted from free cash flow. The hard metric is normalized through-cycle cash flow, not a peak quarter. ## Cash, shares and the acquisition Cash and investments were about $755 million before the deal, with no debt. Paying about $500 million for RealSense leaves about **$255 million**. Shares outstanding are 168.2 million; the valuation uses about 170 million to include the new stock grants. Cognex authorized an additional $500 million of buybacks in February. At $57.70, market value is about $9.7 billion and enterprise value, after the deal, about $9.55 billion. ## Primary valuation: normalized EV to EBITDA | Scenario | Normalized EBITDA | EV to EBITDA | Value per share | | --- | --- | --- | --- | | Bear | $300 million | 19x | $35.03 | | Base | $390 million | 20x | $47.38 | | Bull | $475 million | 23x | $65.76 | The Base includes RealSense conservatively, without extrapolating its growth indefinitely. The primary Base value is **$47.38**. ### Sensitivity: primary value per share | Normalized EBITDA \ Multiple | 18x | 21x | 24x | | --- | --- | --- | --- | | $325 million | $35.91 | $41.65 | $47.38 | | $390 million | $42.79 | $49.68 | $56.56 | | $455 million | $49.68 | $57.71 | $65.74 | ## Secondary valuation: normalized free cash flow Normalized post-deal free cash flow of $300 to $340 million, after integration and retention costs and an eventual RealSense contribution, less about $60 million of stock compensation, leaves about $260 million of hard free cash flow at the midpoint. At 26.5x, the midpoint of a 25x to 28x range, plus remaining cash, that gives **$42.03** per share. Without the stock compensation deduction, the same midpoints give $51.38. ## Historical cross-check Cognex trades at about 34.5x trailing EV to EBITDA against a five-year average near 35.2x, about 9.6x sales against 8.3x, and about 33x cash flow, near its average. Paying the full historical premium at a cyclical recovery point, with an unintegrated acquisition, is aggressive. A normalized reference gives about **$50**. ## Valuation triangulation | Method | Base value | Weight | | --- | --- | --- | | Normalized EV to EBITDA at 20x | $47.38 | 50% | | Free cash flow after stock compensation at 26.5x | $42.03 | 35% | | Historical reference | $50.00 | 15% | | Triangulated Base | $45.90 | 100% | The primary and secondary methods diverge by 12.0%, below the framework's 20% threshold. The Bear and Bull values come from the primary method alone. ## What is the market already pricing in? At the Base multiple of 20x, today's enterprise value implies normalized EBITDA of about **$478 million**, almost exactly the Bull case. The price requires the industrial recovery to continue, gross margins around 70%, EBITDA margins of 30% or more through the cycle, RealSense to reach Cognex-like margins, and meaningful value creation from physical AI. The market is pricing more than the legacy franchise. ## Bear, base and bull scenarios | | Bear | Base | Bull | | --- | --- | --- | --- | | Probability | 25% | 50% | 25% | | Normalized EBITDA | $300 million | $390 million | $475 million | | EV to EBITDA | 19x | 20x | 23x | | Value per share | $35.03 | $45.90 | $65.76 | | vs $57.70 | -39.3% | -20.4% | +14.0% | **Bear:** an industrial downturn returns EBITDA toward mid-cycle lows; the multiple stays near 19x because the market typically looks through troughs. **Base:** a normal cycle and a modest RealSense contribution. **Bull:** AI machine vision and RealSense structurally accelerate growth and justify a premium multiple. The probability-weighted value is **$48.15**, 16.6% below the price. ## How the buy price is set Confidence B starts at a 30% margin of safety. Five points are added for cyclicality and five for integration risk, and five are subtracted for the strong balance sheet and cash conversion, for 35%. A 35% discount to the $45.90 Base gives a **maximum buy price of $29.84**. ## Dividend The quarterly dividend is $0.085, about $0.34 a year, a 0.6% yield. Coverage is excellent, but the dividend does not drive the thesis. ## Reasons to own CGNX - **Leadership.** A global leader in machine vision with a deep installed base. - **Economics.** About 70% gross margins and excellent free cash flow conversion. - **AI products.** AI-enabled vision supports mix and pricing. - **Operating leverage.** Eight straight quarters of margin expansion. - **Physical AI option.** RealSense adds robotic perception in a fast-growing market. - **Capital returns.** Buybacks, a dividend and a debt-free balance sheet. ## What could go wrong? - **Industrial cyclicality.** 2022 to 2023 showed how quickly revenue can fall. - **RealSense.** Integration and returns on a $500 million purchase are unproven. Failure of the recovery plus RealSense to produce sustained per-share cash flow growth is the main thesis breaker. - **Valuation.** The price already implies Bull-case earnings. - **Competition.** Machine vision technology keeps evolving. - **A smaller cushion.** Net cash falls from about $755 million to about $255 million. ## Management execution Record revenue, eight consecutive quarters of margin expansion, strong cash conversion and a debt-free balance sheet, with the 2026 margin target already exceeded. RealSense returns remain unproven. Management credibility scores **16/20**, good. ## Stock Analyza scorecard | Business quality | Score | | --- | --- | | Moat | 18/20 | | Economic return | 17/20 | | Balance sheet | 14/15 | | Cash quality | 14/15 | | Growth and runway | 12/15 | | Management and capital allocation | 5/10 | | Dilution and governance | 2/5 | | Total | 82/100 | The valuation score is **36/100**: the price sits well above Base and close to the Bull value. | Economic classification | Points | | --- | --- | | Economic return | 2/2 | | Revenue growth | 1/2 | | FCF per share | 1/2 | | Balance sheet | 1/1 | | Unit economics | 1/1 | | Repeat economics | 1/2 | | Runway | 2/2 | | Raw 9/12, capped for cyclicality and integration: Quality Growth | 8/12 | ## Confidence score | Confidence | Score | | --- | --- | | Data quality | 5/5 | | Predictability | 3/5 | | Valuation robustness | 4/5 | | Accounting transparency | 5/5 | | Scenario dispersion | 3/5 | | Total | 20/25, grade B | ## What I would watch from here ### Green - Revenue growth of 12% or more - Gross margin of 69% or more - Adjusted EBITDA margin of 30% or more - Free cash flow at 90% or more of adjusted net income - RealSense growing more than 20% after closing - Net liquidity above $250 million after the deal, stable or falling share count ### Yellow - Revenue growth of 5% to 12% - Gross margin of 66% to 69% - EBITDA margin of 25% to 30% - Free cash flow at 70% to 90% of adjusted net income - RealSense growing 10% to 20% - Net liquidity of $100 to $250 million, share count up 0% to 2% ### Red - Revenue growth below 5% - Gross margin below 66% - EBITDA margin below 25% - Free cash flow below 70% of adjusted net income - RealSense growing less than 10% - Net debt, or share count up more than 2% The next review points are Q3 2026 results and the RealSense closing and integration disclosures. ## The three most important thesis breakers 1. A new industrial downturn that reverses the margin expansion. 2. RealSense failing to grow or reach Cognex-like margins. 3. Per-share free cash flow failing to grow after the acquisition. ## Adversarial review The first draft's primary valuation and sensitivity table reconciled, implying about $255 million of post-deal net cash and 170 million shares. Three things were corrected. Its Bear value was rounded down from the model's $35.03 to $34. Its secondary free cash flow value of $46 was below its own ranges, which give $45.62 to $57.50 and $51.38 at the midpoints, and it did not deduct stock compensation, which free cash flow adds back; after that deduction it is $42.03. Its weighted Base was $47.10, stated as $47. The Base moved from $47 to $45.90 and the maximum buy price from $30.55 to $29.84. The draft's twelve-month price-touch probabilities were dropped as not part of the framework. The verdict is unchanged. The strongest counter-argument is that AI machine vision plus RealSense can structurally accelerate growth enough to justify historical premium multiples. The Bull case awards faster scaling and a 23x multiple. The Base withholds full credit until RealSense proves Cognex-like margins and cash conversion. | Robustness test | Base value | | --- | --- | | Base | $45.90 | | No stock compensation deduction | $49.18 | | Stock compensation of $45 million | $46.72 | | The draft's secondary value of $46 | $47.29 | | Primary multiple 22x | $48.20 | | Normalized EBITDA of $350 million | $43.55 | Every test stays well below the price. The publication gate status is PASS\_WITH\_WARNING: post-close purchase accounting for RealSense is not yet available. ## Final verdict: hold at $57.70, watchlist for new money Cognex is a high-quality franchise in a strong upswing, but the price already assumes Bull-case earnings before RealSense has proven itself. **Verdict: HOLD at $57.70, WATCHLIST for new money. Triangulated Base value $45.90, downside 20.4%, Confidence B (20/25). Required margin of safety 35%, maximum buy price $29.84.** For an existing holder, business quality and cash conversion support holding. New money waits for $29.84 or below, or for proof that RealSense and AI vision lift through-cycle earnings. The main thesis breaker is an industrial recovery plus RealSense that fails to generate sustained per-share free cash flow growth. ## More analyses on Patreon This analysis is free. Premium members get every in-depth analysis, the full archive and a vote on which stocks get analyzed next: https://www.patreon.com/stockanalyza ## Sources Primary sources include Cognex's [Q2 2026 results](https://www.sec.gov/Archives/edgar/data/0000851205/000085120526000061/a07052026-xex991xq22026ear.htm), the [Form 10-Q for the quarter ended July 5, 2026](https://www.sec.gov/Archives/edgar/data/0000851205/000085120526000065/cgnx-20260705.htm), the [RealSense acquisition announcement](https://www.sec.gov/Archives/edgar/data/0000851205/000085120526000071/exhibit991-pressrelease.htm) and the [2025 Form 10-K](https://www.sec.gov/Archives/edgar/data/851205/000085120526000012/cgnx-20251231.htm) for stock compensation, plus [Q2 2026 earnings call coverage](https://www.investing.com/news/transcripts/earnings-call-transcript-cognex-posts-record-q2-2026-revenue-shares-slip-93CH-4842858). Consensus, historical multiples and the market price come from third-party data providers. The reference market price is $57.70, the September 24, 2026 regular session close. Balance sheet figures are as of July 5, 2026, adjusted for the announced acquisition. **Disclaimer.** This analysis is provided solely for research and educational purposes. It is not personalized investment, financial, legal or tax advice. Values are estimates, not forecasts or trading instructions. Cognex is exposed to industrial cyclicality, acquisition integration, competition and valuation risks. Investors can lose part or all of their invested capital. Framework: SF-13, industrial machine vision and robotic perception. Economic class: Quality Growth. Engine: normalized EV to EBITDA with free cash flow cross-check. Confidence: B/20. Data status and adversarial gate: PASS\_WITH\_WARNING. Version: Master v3.1.