10Y annualized return is
excellent
at 32.1% per year
CDNS has met or exceeded earnings expectations in
all
recent quarters (10/10)
High Gross Profit Margin
Strong Return on Equity
Solid Operating Profit Margin
Strong Liquidity Ratios
Low Debt Levels
Strong Financial Performance
Record Backlog
Innovative AI Integration
AI Supercycle Opportunities
Expansion of Strategic Partnerships
High Price-to-Earnings Ratio
Elevated Price-to-Sales Ratio
No Dividend Payout
High Interest Coverage
China Revenue Concerns
Slowing Recurring Revenue Growth
Cadence demonstrates a strong business model characterized by solid financial performance and innovation in AI-driven products. However, challenges in the Chinese market and slowing recurring revenue growth present risks to future stability. Overall, the company is well-positioned to capitalize on emerging opportunities, particularly in the AI sector.
Analysis Date: February 18, 2025
Last Updated: March 11, 2025
Past performance does not guarantee future results. The data presented is indicative and may not be updated in real-time.
Cadence Design Systems, Inc. is a company that creates software and tools to help other businesses design and test computer chips. They provide services that make sure these chips work correctly before they are made. Their products help companies in various industries, like telecommunications and automotive, to build better technology, from smartphones to cars. Founded in 1987 and based in San Jose, California, Cadence makes it easier for engineers to design complex electronic systems.
Streams of revenue
Geographic Distribution
Core Products
Business Type
Business to Business
Competitive Advantages
Key Business Risks
Latest News
The recommendations of Wall Street analysts are often relied on by investors when deciding whether to buy, sell, or hold a stock. Media reports about ...
Cadence unveils the world's first DDR5 12.8 Gbps MRDIMM Gen2 memory IP system solution, built on TSMC's cutting-edge N3 process.
Cadence (CDNS) has been one of the stocks most watched by Zacks.com users lately. So, it is worth exploring what lies ahead for the stock.
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$149.36
Current Market Price: $234.80
IV/P Ratio: 0.64x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
-56.99999999999999%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for CDNS
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (60.03)
P/B ratio ≤ 1.5 (10.48)
Current ratio ≥ 2.0 (2.93x)
Long-term debt < Net current assets (0.94x)
Margin of safety (-56.99999999999999%)
CDNS does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
20.65%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-30)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
91.54%
Higher values indicate better efficiency in production
TTM (as of 2025-04-30)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
22.74%
Higher values indicate better overall profitability
TTM (as of 2025-04-30)
A return on equity of 22.90% demonstrates effective management in generating profits from shareholders' equity.
Operating profit margin of 29.18% reflects good control over operating expenses relative to sales.
The absence of dividend payments may be a concern for income-focused investors, signaling a preference for reinvestment over direct returns.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
0.41x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q4 2024
Current Ratio
Current assets divided by current liabilities
2.93x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q4 2024
With a current ratio of 2.93 and a quick ratio of 2.74, CDNS demonstrates robust liquidity, indicating a strong ability to cover short-term liabilities.
A debt-to-equity ratio of 0.41 and debt-to-assets ratio of 27.59% suggest a conservative approach to leveraging, indicating financial prudence.
While high interest coverage (17.82) is a positive, it reflects reliance on generating income solely from operations, which may not be sustainable in downturns.
Meeting Expectations
Higher values indicate better execution and credibility
Recent Results
EPS
Cadence reported a remarkable 13.5% revenue growth for 2024, with a non-GAAP operating margin of 42.5%. This demonstrates effective cost management and operational efficiency.
The company ended 2024 with a record backlog of $6.8 billion, indicating strong demand for its AI-driven chip-to-systems portfolio.
Cadence is integrating AI into its product offerings and exploring new markets, which enhances its competitive edge. Products like Cadence Cerebrus and Allegro X AI are gaining traction.
Cadence expects flat revenue from China in 2025 due to prior declines, which raises concerns about future growth in a significant market.
The ongoing AI supercycle presents vast opportunities for Cadence as they are engaged in building AI infrastructure and collaborating with major players like NVIDIA and Qualcomm.
Cadence's partnerships with foundries like TSMC and GlobalFoundries are enhancing their product offerings and market reach, positioning them well for future growth.
The recurring revenue growth is slowing down, potentially due to market conditions and challenges in the Chinese market, which could impact long-term stability.