The clue is in the title. All three of these stocks offer strong long-term growth prospects, so let's take a look at why machine vision company Cognex (NASDAQ:CGNX), agriculture-focused Raven Industries (NASDAQ:RAVN) and aircraft simulation and pilot training company CAE (NYSE:CAE) are all good options for growth-oriented investors.

Valuations and growth

In order to give readers a quick fix on the three companies, here's a look at the revenue growth and prospective valuations (using analyst consensus). As you can see below, all three offer growth, but their valuations clearly imply the market is expecting more going forward. So let's focus on that aspect of each company's prospects.

Analyst Estimates

Market Cap

Estimated Revenue Growth 2018 (YOY)

Estimated Revenue Growth 2019 (YOY)

Estimated P/E 2018

Estimated P/E 2019

Raven Industries 

$1.45 bn

8%

11.1%

25.2 times

22.4 times

CAE

$5.43 bn

4.9%

6.6%

24.2 times

21.4 times

Cognex 

$7.58 bn

7%

13%

36.4 times

32.6 times

Data source: Yahoo! Finance. Raven Industries' fiscal year ends Jan. 31; figures represent fiscal years 2019 and 2020. YOY = year over year.

Cognex's volatile growth path

Cognex is exposed to some of the best long-term secular trends in the industrial sector. If retailers are going to expand their e-commerce operations, they are going to need to invest in warehouse automation, and this is where Cognex's machine vision solutions can help scan, detect and monitor packages for shipping. Indeed, Cognex's logistics revenue is currently growing at a 50% year-over-year rate. Remarkably, management believes it can grow logistics revenue at a 50% rate over the long term.

Meanwhile, the general secular trend of companies investing in robotics and automation -- led by early adopters such as the automotive industry -- continues apace. Manufacturers have been adopting automation for decades now, and the internet of things is only going to increase this trend. As automated processes increase, manufacturers will need to monitor and provide visual data on automated processes.

Management expects it can grow its overall revenue at a 20% annual rate over the long term -- with even a relatively mature automotive industry seen as growing revenue at 10% a year. 

Unfortunately, Cognex's growth hasn't been, and won't be, in a straight line. For example, after starting the year with optimism, the company served notice that it faced headwinds from delays in capital spending from its OLED display and smartphone customers (Apple is Cognex's single largest customer) and a general slowing of spending from China. 

Clearly, Cognex faces some near-term headwinds, but its long-term growth prospects look excellent. All told, it's definitely a stock to monitor with a bias toward buying, provided China's economy doesn't slow down sharply in 2019.

An upwards pointing arrow made of dollars.

Image source: Getty Images.

CAE is a play on commercial aviation

This is a very interesting company, as it offers good end market exposure (civil and military aviation), and three separate, but related, growth drivers:

  • The need to meet significant growth in demand for airline pilots -- there are 360,000 currently active pilots, and management estimates 150,000 pilots will be needed for replacement and 170,000 needed for growth over the next decade.  
  • Management believes its market-leading position in training simulators will help CAE gain market share in the global training market.
  • Growth in civil aviation could lead to airlines increasingly outsourcing pilot training.

CAE's key end market is commercial aviation, and the good news is that the International Air Transport Association (IATA) sees continued growth in the next 20 years. For example, global passenger growth will be 7% in 2018 and is set to double in the next two decades, according to the IATA.

If the IATA is right, CAE's forecasts for overall growth in the number of pilots needed and for the need to replace an aging pilot demographic mean that the company is on a solid growth path.

Introducing Raven Industries

The mini-industrial conglomerate operates out of three different segments -- you can see the highlights of the first nine months of its fiscal 2019 below.

Nine Months 2019

Revenue (Millions)

Revenue Growth

Operating Income (Millions)

Operating Income Margin

Applied Technology

$100.5

6.7%

$32.5

32.3%

Engineered Films

$177.1

12.3%

$33.2

18.8%

Aerostar

$41.4

37.8%

$10.5

25.3%

Data source: Company presentations.

The engineered films business makes heavy-duty films and sheetings used in agriculture, oil and gas and general industrial applications. Its revenue can therefore bounce around based on myriad end-market conditions -- energy prices, crop harvests, severe weather events, etc.

Aerostar makes stratospheric balloons for near-space applications such as communication, radar systems and meteorology. The segment's sales are therefore heavily tied to government contracts and vary from period to period based on the timing of contract awards. No matter; management believes its long-term growth rate is around 10%.

The applied technology segment is arguably the most exciting of the three. Its precision agriculture solutions -- field computers, application controls, guidance and steering systems, spraying technology -- are set to take off as farmers increasingly get used to using smart farming technology in the field. You only have to look at how Deere is boosting its growth and margin prospects from selling its precision agriculture technology in order to see the opportunity ahead for Raven Industries. Deere's management states that take-up rates on some of its precision agriculture solutions are in excess of 50%.  

Stocks to buy?

Given the volatility implied in revenue at Cognex and Raven Industries, they are stocks that investors should be looking to buy after a period of near-term weakness -- the idea being that long-term growth prospects will shine through in the end. Meanwhile, CAE will suit investors looking for long-term exposure to global commercial aviation markets.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and Cognex. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.