Because the stock for all three of these companies trades at more than 20 times current earnings, shares of ON Semiconductor (ON -2.04%), Cognex (CGNX -1.64%), and Teledyne Technologies (TDY -0.77%) wouldn't be considered cheap by the usual metrics. Still, all three of these tech stocks have excellent long-term growth prospects that could make their current valuations look very reasonable.

Let's find out more about these three hot stocks.

1. ON Semiconductor is positioned in desirable end markets

ON Semiconductor, commonly known as Onsemi, is working toward a future focused on automotive and industrial end markets. Management expects these two segments will combine to contribute 75% of revenues in 2025 compared to 60% in 2021.

Moreover, it's positioned in high-growth markets within those industry verticals. It's no secret that automotive companies are investing heavily in electric vehicles (EVs), advanced driver assistance systems (ADAS), and autonomous driving technology. Meanwhile, the automation of the industrial sector is another hot secular growth trend to invest in. 

Onsemi has exposure to all these end markets. For example, its intelligent power technology helps lower the weight, extends the range of EVs, and enables fast charging. Meanwhile, its intelligent sensing solutions enable industrial automation, ADAS, and autonomous driving. 

There will inevitably be pressure on automotive and industrial spending overall in 2023, given the weakness in the economy. Still, there's also a strong secular shift in investment toward EVs from internal combustion engines (ICEs), and there's no sign of a slowdown in spending on industrial automation.

Meanwhile, Onsemi's content per vehicle is far higher on EVs than on ICE vehicles, and the explosion of investment in digitalization in manufacturing, and the productivity improvements that it brings, ensure spending on sensing technology will remain strong. As such, the company looks set for long-term growth following a lull in 2023. 

With a P/E ratio of 21.2, Onsemi stock is trading at more normal levels last seen just before the pandemic sent valuations off-kilter. Given its future growth potential, that makes the stock worthy of a closer look.

2. Cognex's growth is always lumpy

Machine vision company Cognex is also expected to pass through a trough in end demand in 2023 and grow strongly over the long term. So it's almost a perfect storm for the company this year, with its three key end markets (automotive, logistics, and consumer electronics) slowing. 

The automotive market has traditionally been the early adopter of new automation technology, and that's also the case with machine vision. As such, Cognex has significant sales to the ICE vehicle market. That's an issue in 2023 as the automotive market is slowing. As Cognex's CFO Paul Todgham noted on the earnings call, "automotive spending in the first quarter was tepid, driven by more cautious investment from our customers as they see demand for their products soften."

Cognex's logistics market (mainly e-commerce warehousing) is declining this year due to a natural correction from previous years' heavy investment and weakening consumer spending trends. Finally, Cognex's exposure to premium smartphones (Apple is a significant customer) isn't helping much in 2023, and CEO Rob Willett told investors, "We expect annual revenue from consumer electronics will be modestly lower this year after growing in the mid-teens on a constant currency basis in 2022."

That said, Cognex's end markets are always lumpy, and underlying solid trends exist across its businesses. Cognex has substantial exposure to EV battery spending, which continues to grow strongly even as ICE spending moderates. Its logistics sales will return to growth as e-commerce continues to take a greater share of retail sales. Finally, smartphone and consumer electronics sales will grow again as customers develop new models. 

CGNX Revenue (TTM) Chart

Data by YCharts

Ultimately, Cognex is still a growth company, but the confluence of adverse effects in 2023 means it's set for a year of declining revenue and earnings (the current P/E is 57). However, if you are confident in the long-term growth story, there's a strong argument for picking up some stock now.

3. Teledyne sees the future

Speaking of visionary technology, Teledyne Technologies generates most of its revenue and earnings from digital imaging technology. It also creates instrumentation used for monitoring and control in different environments, including harsh ones. Its engineering segment provides integration services, software development, and manufacturing solutions across numerous industries. Its aerospace and defense electronics segment provides complex electronic components and subsystems for communication products as well as general aviation batteries.

While Cognex's machine vision is used in an automated environment, Teledyne's imaging products (from components to integrated systems, including high-performance cameras, sensors, and systems) are used across the industrial world, from space-based imaging to maritime thermal imaging and defense. Meanwhile, its X-ray sensors and microwave systems are used across the healthcare and industrial sector. For a more readily available illustration of its technology, consider its thermal imaging technology, which can be found on some rugged smartphone models.

Teledyne's long-term growth opportunity comes from the increasing demand for its application technology and the explosion of data analytics and artificial intelligence usage. Before utilizing data, you first need to capture and analyze it, and that's where Teledyne's imaging and instrumentation technology comes in. It's an exciting trend to be exposed to, and Teledyne has a long growth runway ahead of it.

The stock trades at an above-industry-average P/E of 25, but that level is actually on the low side of its own five-year average.