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. Boston Scientific (NYSE: BSX), Ford Motor (NYSE: F) and Sony (NYSE: SNE) are customers.

The company pleased investors earlier in the month, when it reported Q4 EPS of 25 cents and revenues of $65.3 million. Analysts had been expecting 20 cents and $60.9 million. Management also guided Q1 EPS to 13-18 cents (18 cent consensus) and Q1 revenues to $58-$61 million ($58.45 million consensus). In discussing the coming year, the CEO alluded to the introduction of "a number of important new products." Needham subsequently upgraded the shares to "strong buy" and declared a price target of $25.

The price popped on the news and then moved into a bullish "flag" consolidation pattern. Stocks frequently exit flags 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 two "strong buys", three "buys" and two "holds". Analysts see a 25% growth rate, through the next year. The CGNX Price to Book ratio (1.78), Operating Margin (12.00%), Net Profit Margin (11.92%) and Revenue per Employee ($282k) compare favorably with industry averages. Institutions hold about 90% 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 $14.67 and $25.87. A stop-loss of $16.80 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.