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Cadence Design Systems Inc CDNS

Morningstar Rating
$301.47 +0.66 (0.22%)
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Company Report

Cadence Design Systems Earnings: Increasing Adoption of AI-Based Solutions Propel Growth

We are raising our fair value estimate for narrow-moat Cadence Design Systems to $240 from $209. The firm reported fourth-quarter results that are mostly in line with our revenue and margin expectations while delivering upside on EPS. Cadence’s first-quarter forecast was below FactSet consensus estimates and was likely the culprit for the stock falling about 6% afterhours, while its forecast for 2024 was in line with consensus but modestly below our prior expectations. Our fair value increase comes from greater optimism around medium-term revenue growth as we factor in even greater electronic design automation adoption driven by chip demand from artificial intelligence. Despite our fair value increase, we continue to view the stock as overvalued.

Price vs Fair Value

CDNS is trading within a range we consider fairly valued.
Price
$300.58
Fair Value
$617.00
Uncertainty
High
1-Star Price
$867.00
5-Star Price
$398.00
Economic Moat
Rgdlyfg
Capital Allocation
Dpmwgdsmw

Bulls Say, Bears Say

Bulls

Secular tailwinds in chip design such as 5G, Inernet of Things, AI/ML, and others should increase demand for EDA tools and support growth for Cadence.

Bears

Interoperability of EDA tools poses a risk that influential customers could switch to a different vendor with relative ease, which could have an impact on long-term growth.

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News

Trading Information

Previous Close Price
$300.81
Day Range
$299.95304.70
52-Week Range
$189.26316.00
Bid/Ask
$301.29 / $301.56
Market Cap
$82.17 Bil
Volume/Avg
144,582 / 1.6 Mil

Key Statistics

Price/Earnings (Normalized)
58.34
Price/Sales
20.04
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
0.86%

Company Profile

Cadence Design Systems is a provider of electronic design automation software, intellectual property, and system design and analysis products. EDA software automates the chip design process, enhancing design accuracy, productivity, and complexity in a full-flow end-to-end solution. Cadence offers a portfolio of design IP, as well as system design and analysis products, which enable system-level analysis and verification solutions. Cadence’s comprehensive portfolio is benefiting from a mutual convergence of semiconductor companies moving up-stack toward systems-like companies, and systems companies moving down-stack toward in-house semiconductor design. The resulting expansion in EDA customers, alongside secular digitalization of various end markets, benefits EDA vendors like Cadence.
Sector
Technology
Industry
Software - Application
Stock Style Box
Large Growth
Total Number of Employees
11,200

Competitors

Valuation

Metric
CDNS
ANSS
SNPS
Price/Earnings (Normalized)
58.3441.9050.87
Price/Book Value
23.995.3713.04
Price/Sales
20.0412.8214.44
Price/Cash Flow
56.6236.8040.85
Price/Earnings
CDNS
ANSS
SNPS

Financial Strength

Metric
CDNS
ANSS
SNPS
Quick Ratio
1.022.250.88
Current Ratio
1.242.301.29
Interest Coverage
35.6113.14646.55
Quick Ratio
CDNS
ANSS
SNPS

Profitability

Metric
CDNS
ANSS
SNPS
Return on Assets (Normalized)
26.44%11.39%19.43%
Return on Equity (Normalized)
46.47%15.41%32.24%
Return on Invested Capital (Normalized)
37.61%13.55%28.22%
Return on Assets
CDNS
ANSS
SNPS
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