Cadence Design Systems, Inc.
Cadence Design Systems, Inc. Fundamental Analysis
Cadence Design Systems, Inc. (CDNS) shows strong financial fundamentals with a PE ratio of 72.19, profit margin of 20.94%, and ROE of 21.68%. The company generates $5.3B in annual revenue with strong year-over-year growth of 13.48%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 82.7/100 based on profitability, valuation, growth, and balance sheet metrics. The B+ grade reflects solid fundamentals with room for improvement in valuation or growth.
Fundamental Health Score
We analyze CDNS's fundamental strength across five key dimensions:
Efficiency Score
ExcellentCDNS demonstrates superior asset utilization.
Valuation Score
WeakCDNS trades at a premium to fair value.
Growth Score
ModerateCDNS shows steady but slowing expansion.
Financial Health Score
ExcellentCDNS maintains a strong and stable balance sheet.
Profitability Score
ExcellentCDNS achieves industry-leading margins.
Key Financial Metrics
Is CDNS Expensive or Cheap?
P/E Ratio
CDNS trades at 72.19 times earnings. This suggests a premium valuation.
PEG Ratio
When adjusting for growth, CDNS's PEG of 15.68 indicates potential overvaluation.
Price to Book
The market values Cadence Design Systems, Inc. at 14.62 times its book value. This suggests the stock is fully valued or overvalued on an asset basis.
EV/EBITDA
Enterprise value stands at 44.74 times EBITDA. This signals the market has high growth expectations.
How Well Does CDNS Make Money?
Net Profit Margin
For every $100 in sales, Cadence Design Systems, Inc. keeps $20.94 as profit after all expenses.
Operating Margin
Core operations generate 28.17 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $21.68 in profit for every $100 of shareholder equity.
ROA
Cadence Design Systems, Inc. generates $10.92 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Cadence Design Systems, Inc. generates strong operating cash flow of $1.74B, reflecting robust business health.
Free Cash Flow
Cadence Design Systems, Inc. generates strong free cash flow of $1.59B, providing ample flexibility for dividends, buybacks, or growth.
FCF Per Share
Each share generates $5.86 in free cash annually.
FCF Yield
CDNS converts 1.97% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
72.19
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
15.68
vs 25 benchmark
P/B Ratio
Price to book value ratio
14.62
vs 25 benchmark
P/S Ratio
Price to sales ratio
15.18
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
0.45
vs 25 benchmark
Current Ratio
Current assets to current liabilities
2.86
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.22
vs 25 benchmark
ROA
Return on assets percentage
0.11
vs 25 benchmark
ROCE
Return on capital employed
0.18
vs 25 benchmark
How CDNS Stacks Against Its Sector Peers
| Metric | CDNS Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 72.19 | 35.19 | Worse (Expensive) |
| ROE | 21.68% | 1155.00% | Weak |
| Net Margin | 20.94% | -127067.00% (disorted) | Strong |
| Debt/Equity | 0.45 | 0.41 | Neutral |
| Current Ratio | 2.86 | 4.71 | Strong Liquidity |
| ROA | 10.92% | -314918.00% (disorted) | Strong |
CDNS outperforms its industry in 3 out of 6 key metrics, particularly excelling in Net Margin, but lagging in P/E Ratio.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Cadence Design Systems, Inc.'s 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
100.14%
Industry Style: Growth, Innovation, High Beta
High GrowthEPS CAGR
7.52%
Industry Style: Growth, Innovation, High Beta
GrowingFCF CAGR
74.06%
Industry Style: Growth, Innovation, High Beta
High Growth