These growth stocks have an interesting combination of secular and cyclical growth prospects. In other words, they can grow through expansions in their end markets (cyclical) and also grow as a consequence of increasing adoption of their technologies. That's why I think machine vision company Cognex (CGNX -1.13%), and power and sensing technology company ON Semiconductors (ON -0.97%) are stocks to buy now.

Cognex

A quick look at this company's long-term revenue and gross profit progressions shows just how volatile its revenue and profit growth are. It also shows a long-term uptrend that comes from the increasing adoption of machine vision in technology. 

That comes from key end markets such as consumer electronics, where its technology is used in smartphone production to monitor and guide the layering of screens; logistics, where it's used in e-commerce fulfillment automation; and automotive, where it's used to monitor and optimize production. Meanwhile, Cognex continues to grow its revenue in other markets such as the medical industry and the food and beverage industry.

CGNX Revenue (TTM) Chart

CGNX Revenue (TTM) data by YCharts.

That said, the chart doesn't lie, and it's clear Cognex is having a challenging year. Logistics and e-commerce fulfillment customers, which rushed to build out fulfillment capacity early in the pandemic when their sales were growing at torrid rates, are now in the midst of an extended slowdown in spending. Consumer electronics capital spending has slowed in line with the pressure on consumer discretionary spending that's coming from inflation and higher interest rates. Finally, even though Cognex's electric vehicle (EV) business grew by 30% year over year in the second quarter, it represents less than 25% of its automotive revenue, and its non-EV automotive revenue faces challenges as automakers have excess inventory.

A long story short, conditions in Cognex's end markets could hardly be worse right now, and its sales are forecast to decline by 16.7% in 2023. Still, growth investors don't buy stocks based on the numbers from a single quarter or even a single year, and Cognex's revenue growth has always been lumpy. 

Cognex's EV revenue is growing as a share of its overall automotive revenue and provides excellent underlying support. Meanwhile, CEO Rob Willett told investors in August that its logistics end market is "kind of at the bottom of the trough," and its consumer electronics revenue will increase as its customers seek to introduce new models. As such, if this year marks a cyclical low -- Wall Street analysts expect Cognex's revenue to bounce back to 14% growth in 2024 -- then now could be a good time to invest in a company with excellent long-term growth prospects.

ON Semiconductor

Some of the themes expressed above can also be seen in ON Semiconductor's results. The company breaks out its end markets in terms of auto, industrial, and "other." Its automotive revenue is driven by the increased use of sensing technology (particularly in EVs). Its industrial revenue is exposed to secular growth markets like industrial automation, EV charging, smart buildings and infrastructure, and robotics. Everything else -- consumer electronics, routers, gaming equipment, and white goods, among other things -- gets lumped into the "other" category. 

ON's exposure to sensing technology in the automotive space powered a 35% year-over-year increase in its automotive revenue in Q2, and its industrial revenue grew by a solid 5%. However, a combination of weak "other" end markets and management's conscious decision to exit non-core markets led to nearly flat total revenue year over year. 

An electric vehicle charging.

Image source: Getty Images.

Thinking longer term, the move to exit its non-core end markets is likely to lead to an acceleration in growth. At the same time, technology investors are excited by ON's investments in silicon carbide chips. Finally, management believes the company has opportunities to significantly increase its content in solutions across several growth markets such as EVs and EV infrastructure, industrial automation, and advanced driver assistance systems (ADAS).

It all adds up to a significant cyclical and secular growth opportunity. In common with Cognex, Wall Street analysts see ON increasing its growth rate in 2024. The Wall Street consensus is for revenue growth of just 1% in 2023, bouncing to 7% in 2024. As such, both companies could be on the verge of multiyear expansions in revenue and profits.