Wealth Creations Research Cognex CGNX 061114 Disclaimer This

Wealth Creations Research Cognex (CGNX) 06/11/14

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Content The Business 1. Core Business 2. Business Risk 3. Growth Drivers The Management 1. Board of Director Profile 2. Remuneration 3. Shareholders Statistic The Valuation 1. Numbers 2. Valuation

Core Businesses Cognex Corporation is the world’s leading provider of vision systems, vision software, vision sensors and surface inspection systems used in manufacturing automation. Cognex is also a leader in industrial ID readers. Cognex vision helps companies improve product quality, eliminate production errors, lower manufacturing costs, and exceed consumer expectations for high quality products at an affordable price.

Business Risk A higher mix of lower-margin Product ID sales significantly hurts profitability. Competitors dominate the market for 3 -D machine vision, while the logistics customers stick with "good enough" laser scanners. Accounts receivables growth once again begins to outpace revenue growth, indicating more generous credit terms or difficulty in collecting payment.

Growth Drivers • International growth accelerates as European and Asian customers adopt more Product ID and Logistics solutions • Life sciences applications become an increasingly significant growth area for the company, making more Cognex systems part of the approved specifications in regulated devices. • Cognex finds good acquisition targets, whether among current competitors or in adjacent markets.

Executive Director Profile Name: Robert Willet Position: Chief Executive Officer (2011 - Present) Past Roles: Chief Operating Officer (Cognex Corp) Education: Bachelor of Arts Degree from Brown University and M. B. A from Yale University

Executive Director Profile Name: Robert Shillman Position: Chief Culture Officer (2011 - Present) Past Roles: Chief Executive Officer (Cognex Corp) Education: B. S. E. E. from Northeastern University, as well as an M. S. E. E. and a Ph. D. from the Massachusetts Institute of Technology.

Executive Director Profile Name: Richard Morin Position: Chief Financial Officer (1999 - Present) Past Roles: Chief Financial Officer (C & K Components) Education: BA in economics and accounting from The College of the Holy Cross, and is a Certified Public Accountant

Remuneration (FY 13) Name Fixed Pay Bonus Others Total Robert Willet $0. 4 M Nil $1. 2 M $1. 6 M Richard Morin $0. 3 M Nil $0. 8 M $1. 1 M Robert Shillman $0. 0 M Nil $0 M Key Executive Salary % of Profits $2. 7 M 3. 6%

Shareholders Statistic Name Percentage Robert Willet 0% Richard Morin 0. 002% Robert Shillman 4. 6% Remarks

Profit & Loss Profit and Loss 400 350 300 Axis Title 250 Revenue (Sales, Turnover) 200 COGS (Operating Expense) 150 Net Profits After Tax (NPAT) 100 50 0 -50 2009 2010 2011 2012 2013 • Compound growth rates of the revenue is 19% as for the expenses is growing about 9% which is a good thing for this company

Balance Sheet 700 600 Axis Title 500 Cash and Cash Equivalents 400 Total Borrowings (Debts) 300 Equity (Shareholder's funds) 200 100 0 2009 2010 2011 2012 2013

Profitability 30. 00% 25. 00% Axis Title 20. 00% 15. 00% Gross Profit Margins (%) 10. 00% Net Profit Margins (%) 5. 00% Return On Equity (%) 0. 00% -5. 00% 2009 2010 2011 2012 2013 -10. 00% • The margins are good for most of the years except for FY 09 where the lose some money

Activity Ratio Axis Title Activity Ratios 100. 00 90. 00 80. 00 70. 00 60. 00 50. 00 40. 00 30. 00 20. 00 10. 00 Stock Turnover (Days) Debtors (Days) Creditors (Days) Cash Conversion Cycle 2009 2010 2011 2012 2013 • Only concern is that the receivables (Days) is very high don’t know whether the company can collec the debt when times of crisis

Valuation Discounted Earnings Model 7% 2% Growth Rate Yr 1 2 3 4 5 6 7 8 9 10 Earnings 1. 527 1. 634 1. 748 1. 870 2. 001 2. 141 2. 291 2. 452 2. 623 2. 807 Discount Rate 0. 977 0. 954 0. 932 0. 911 0. 890 0. 869 0. 849 0. 830 0. 811 0. 792 Discounted Earnings 1. 492 1. 559 1. 630 1. 704 1. 781 1. 862 1. 946 2. 034 2. 127 2. 223 Cumulative Earnings 1. 492 3. 051 4. 681 6. 385 8. 166 10. 028 11. 974 14. 008 16. 135 18. 358 Company Rating: A Price Target: $18. 79 - $19. 69 Recommendation: Sell Risk Free Rate