So you want to invest in robotics and e-commerce stocks but don't know how? One option would be to buy stocks with heavy exposure to either of these areas -- but what about buying one stock with significant exposure to both? That's where Cognex Corporation (NASDAQ:CGNX) comes in. Let's take a look at the how and why.

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Cognex Corporation offers growth from robotics and e-commerce. Image source: Getty Images

Introducing Cognex Corporation

The company describes itself as the "world's leading provider of vision systems, vision software, vision sensors, and industrial ID readers used in manufacturing automation." Cognex operates in a niche market of the factory automation space; its main competitor is a small part of a much larger corporation, Japan's Keyence.

Essentially, machine vision applications monitor and control automated processes, a critical part of the robotics industry. As such, wherever companies are implementing automation and robotics, there is a potential market for machine vision. As Cognex's CEO Rob Willet said on a recent earnings call, "I think there's just a continuing drive toward the need to replace literally hundreds of thousands of bodies who are involved and people who are involved in manufacturing products and whose eyes and brains are involved in that process."

It's a compelling argument and one that convinced companies like Apple to place large orders from Cognex. In fact, Apple is Cognex's largest customer

Factory automation growth

Cognex currently generates 97% of its revenue from factory automation (the other 3% comes from the semiconductor industry), and management believes the company can grow factory automation revenue by 20% a year over the long-term. That's an impressive figure in itself, but it's dwarfed by the 45% overall revenue growth generated in the first three quarters of 2017 compared to the same period last year. The recent third-quarter results saw Cognex's revenue up 76%, driven by filling some large customer electronics orders.

However, Cognex isn't just about growth in consumer electronics. Cognex's factory automation grew by 30% in the third quarter, a figure significantly above the 20% target. The automotive market is traditionally the earliest adopter of factory automation and robotics technology, and it's also Cognex's second-biggest end market -- management cited particularly strong revenue growth in China, as automakers are increasingly adopting automated production in the country.

So Cognex is a play on robotics, but where does e-commerce come in?

Cognex's logistics sales are growing at 50% a year

The answer lies in Cognex's logistics-based sales. On the recent earnings call, Willett outlined that the logistics business is "about 10% of our business currently, and it's growing well in excess of 50% this year, and 50% is the growth rate at which we can think we can grow it over the long term."

Willet sees "retail and e-commerce fulfilment" as the biggest part of Cognex's logistics revenue. In case you are wondering how Cognex's machine vision solutions work in these markets, consider the need companies have to scan, detect, and monitor packages for shipping e-commerce orders.

Given the growth of e-commerce and the importance of retailers to distribute products, Cognex's projection of a 50% growth rate in logistics becomes understandable. Meanwhile, the company continues to develop its solutions for new markets, such as mobile terminals and airport baggage handling. 

Looking ahead

While the stock has excellent long-term growth prospects, it's definitely not a conventionally cheap stock. Following a 160% rise in the last year, the stock currently trades on a forward PE ratio of 48 times earnings.

That said, high-growth stocks tend to have a momentum all their own, and all it would take is a few more large orders from the likes of Apple before analysts are scrambling to raise estimates. 

All told, if you believe trends in capital spending on robotics and e-commerce will only strengthen in the future, Cognex is a stock well worth looking at.