Cognex Corporation (NASDAQ: CGNX) provides machine vision computer systems that automate a range of manufacturing processes. Essentially, the systems link to video cameras and serve as eyes where human vision is insufficient. The firm's Modular Vision Systems automate the manufacture of discrete items (e.g: semiconductor chips) by locating, identifying, inspecting and measuring them during the manufacturing process. Its Surface Inspection Systems monitor the surfaces of materials processed in a continuous fashion (e.g: paper, metal, plastic) for imperfections. Cognex has offices throughout North America, Japan, Europe, Asia and Latin America. Ford Motor (NYSE: F) is a major customer.

The company pleased investors earlier in the month, when it reported Q3 EPS of 17 cents and revenues of $54.8 million. Analysts had been expecting 10 cents and $54.6 million. Management also guided Q4 EPS to 17-23 cents (18 cent consensus) and Q4 revenues to $56-$62 million ($59.89 million consensus). Bear Stearns and Barrington Research subsequently upgraded the shares to "outperform".

The price popped on the news and then moved into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Altogether, brokers now recommend the issue with one "strong buy", four "buys" and two "holds". Analysts see a 59% growth rate, through the next year. The CGNX Price to Book ratio (1.97), Operating Margin (11.73%) and Net Profit Margin (11.57%) compare favorably with industry averages. Institutions hold about 92% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $16.68 and $25.87. A stop-loss of $18.20 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.