CADENCE DESIGN SYS INC (CDNS) Stock Fundamental Analysis
NASDAQ:CDNS - Nasdaq - US1273871087 - Common Stock - Currency: USD
We assign a fundamental rating of 6 out of 10 to CDNS. CDNS was compared to 283 industry peers in the Software industry. While CDNS has a great profitability rating, there are some minor concerns on its financial health. CDNS is valued quite expensive, but it does show an excellent growth. These ratings could make CDNS a good candidate for growth investing.
1. Profitability
1.1 Basic Checks
In the past year CDNS was profitable.
CDNS had a positive operating cash flow in the past year.
CDNS had positive earnings in each of the past 5 years.
In the past 5 years CDNS always reported a positive cash flow from operatings.
1.2 Ratios
CDNS has a better Return On Assets (10.64%) than 87.63% of its industry peers.
With an excellent Return On Equity value of 20.21%, CDNS belongs to the best of the industry, outperforming 86.93% of the companies in the same industry.
Looking at the Return On Invested Capital, with a value of 15.31%, CDNS belongs to the top of the industry, outperforming 92.58% of the companies in the same industry.
Measured over the past 3 years, the Average Return On Invested Capital for CDNS is significantly above the industry average of 12.04%.
The last Return On Invested Capital (15.31%) for CDNS is well below the 3 year average (20.16%), which needs to be investigated, but indicates that CDNS had better years and this may not be a problem.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 10.64% | ||
| ROE | 20.21% | ||
| ROIC | 15.31% |
ROA(3y)15.55%
ROA(5y)15.49%
ROE(3y)28.03%
ROE(5y)26.64%
ROIC(3y)20.16%
ROIC(5y)18.92%
1.3 Margins
Looking at the Profit Margin, with a value of 19.88%, CDNS belongs to the top of the industry, outperforming 85.51% of the companies in the same industry.
In the last couple of years the Profit Margin of CDNS has declined.
CDNS has a better Operating Margin (30.74%) than 92.93% of its industry peers.
In the last couple of years the Operating Margin of CDNS has grown nicely.
CDNS has a Gross Margin of 85.57%. This is amongst the best in the industry. CDNS outperforms 93.64% of its industry peers.
In the last couple of years the Gross Margin of CDNS has remained more or less at the same level.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 30.74% | ||
| PM (TTM) | 19.88% | ||
| GM | 85.57% |
OM growth 3Y4.75%
OM growth 5Y6.92%
PM growth 3Y-0.79%
PM growth 5Y-11.69%
GM growth 3Y-1.39%
GM growth 5Y-0.58%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) just above the Cost of Capital (WACC), CDNS is creating some value.
CDNS has more shares outstanding than it did 1 year ago.
The number of shares outstanding for CDNS has been reduced compared to 5 years ago.
Compared to 1 year ago, CDNS has a worse debt to assets ratio.
2.2 Solvency
The Debt to FCF ratio of CDNS is 1.56, which is an excellent value as it means it would take CDNS, only 1.56 years of fcf income to pay off all of its debts.
CDNS has a better Debt to FCF ratio (1.56) than 69.61% of its industry peers.
CDNS has a Debt/Equity ratio of 0.49. This is a healthy value indicating a solid balance between debt and equity.
The Debt to Equity ratio of CDNS (0.49) is worse than 65.37% of its industry peers.
Although CDNS does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.49 | ||
| Debt/FCF | 1.56 | ||
| Altman-Z | N/A |
ROIC/WACC1.36
WACC11.3%
2.3 Liquidity
CDNS has a Current Ratio of 2.82. This indicates that CDNS is financially healthy and has no problem in meeting its short term obligations.
The Current ratio of CDNS (2.82) is better than 75.62% of its industry peers.
CDNS has a Quick Ratio of 2.67. This indicates that CDNS is financially healthy and has no problem in meeting its short term obligations.
The Quick ratio of CDNS (2.67) is better than 73.50% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 2.82 | ||
| Quick Ratio | 2.67 |
3. Growth
3.1 Past
The Earnings Per Share has grown by an impressive 32.42% over the past year.
CDNS shows a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 22.21% yearly.
The Revenue has grown by 22.29% in the past year. This is a very strong growth!
CDNS shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 14.72% yearly.
EPS 1Y (TTM)32.42%
EPS 3Y21.73%
EPS 5Y22.21%
EPS Q2Q%28.91%
Revenue 1Y (TTM)22.29%
Revenue growth 3Y15.81%
Revenue growth 5Y14.72%
Sales Q2Q%20.25%
3.2 Future
Based on estimates for the next years, CDNS will show a quite strong growth in Earnings Per Share. The EPS will grow by 12.88% on average per year.
Based on estimates for the next years, CDNS will show a quite strong growth in Revenue. The Revenue will grow by 11.65% on average per year.
EPS Next Y16.01%
EPS Next 2Y15.27%
EPS Next 3Y15.05%
EPS Next 5Y12.88%
Revenue Next Year12.12%
Revenue Next 2Y12.12%
Revenue Next 3Y12.02%
Revenue Next 5Y11.65%
3.3 Evolution
Although the future EPS growth is still strong, it is not able to hold up the even more excellent growth rate of the past years.
The estimated forward Revenue growth is still strong, although it is decreasing when compared to the stronger growth in the past years.
4. Valuation
4.1 Price/Earnings Ratio
Based on the Price/Earnings ratio of 52.86, the valuation of CDNS can be described as expensive.
CDNS's Price/Earnings is on the same level as the industry average.
When comparing the Price/Earnings ratio of CDNS to the average of the S&P500 Index (26.82), we can say CDNS is valued expensively.
With a Price/Forward Earnings ratio of 44.91, CDNS can be considered very expensive at the moment.
The rest of the industry has a similar Price/Forward Earnings ratio as CDNS.
Compared to an average S&P500 Price/Forward Earnings ratio of 35.24, CDNS is valued a bit more expensive.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 52.86 | ||
| Fwd PE | 44.91 |
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of CDNS indicates a somewhat cheap valuation: CDNS is cheaper than 61.13% of the companies listed in the same industry.
The rest of the industry has a similar Price/Free Cash Flow ratio as CDNS.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 61.37 | ||
| EV/EBITDA | 53.45 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates CDNS does not grow enough to justify the current Price/Earnings ratio.
The excellent profitability rating of CDNS may justify a higher PE ratio.
A more expensive valuation may be justified as CDNS's earnings are expected to grow with 15.05% in the coming years.
PEG (NY)3.3
PEG (5Y)2.38
EPS Next 2Y15.27%
EPS Next 3Y15.05%
5. Dividend
5.1 Amount
CDNS does not give a dividend.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | N/A |
356.25
+6.37 (+1.82%)
Chartmill FA Rating
GICS SectorInformation Technology
GICS IndustryGroupSoftware & Services
GICS IndustrySoftware
Earnings (Last)
Earnings (Next)
Inst Owners91.41%
Inst Owner Change-3.13%
Ins Owners0.27%
Ins Owner Change9.18%
Market Cap97.27B
Analysts78.62
Price Target370.97 (4.13%)
Short Float %1.12%
Short Ratio1.64
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | N/A |
Yearly DividendN/A
Dividend Growth(5Y)N/A
DPN/A
Div Incr Years0
Div Non Decr Years0
Ex-DateN/A
Surprises & Revisions
EPS beat(2)2
Avg EPS beat(2)3.64%
Min EPS beat(2)3.21%
Max EPS beat(2)4.06%
EPS beat(4)4
Avg EPS beat(4)5.03%
Min EPS beat(4)1.28%
Max EPS beat(4)11.57%
EPS beat(8)8
Avg EPS beat(8)3.59%
EPS beat(12)12
Avg EPS beat(12)3.36%
EPS beat(16)16
Avg EPS beat(16)4.59%
Revenue beat(2)1
Avg Revenue beat(2)-0.84%
Min Revenue beat(2)-1.71%
Max Revenue beat(2)0.03%
Revenue beat(4)2
Avg Revenue beat(4)-0.51%
Min Revenue beat(4)-1.71%
Max Revenue beat(4)0.87%
Revenue beat(8)3
Avg Revenue beat(8)-0.58%
Revenue beat(12)4
Avg Revenue beat(12)-0.49%
Revenue beat(16)7
Avg Revenue beat(16)-0.18%
PT rev (1m)12.62%
PT rev (3m)14.54%
EPS NQ rev (1m)3.63%
EPS NQ rev (3m)2.7%
EPS NY rev (1m)0%
EPS NY rev (3m)-0.09%
Revenue NQ rev (1m)0.67%
Revenue NQ rev (3m)0.6%
Revenue NY rev (1m)-0.13%
Revenue NY rev (3m)-0.26%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 52.86 | ||
| Fwd PE | 44.91 | ||
| P/S | 19.11 | ||
| P/FCF | 61.37 | ||
| P/OCF | 56.69 | ||
| P/B | 19.43 | ||
| P/tB | 54.41 | ||
| EV/EBITDA | 53.45 |
EPS(TTM)6.74
EY1.89%
EPS(NY)7.93
Fwd EY2.23%
FCF(TTM)5.81
FCFY1.63%
OCF(TTM)6.28
OCFY1.76%
SpS18.64
BVpS18.34
TBVpS6.55
PEG (NY)3.3
PEG (5Y)2.38
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 10.64% | ||
| ROE | 20.21% | ||
| ROCE | 19.53% | ||
| ROIC | 15.31% | ||
| ROICexc | 23.64% | ||
| ROICexgc | 62.26% | ||
| OM | 30.74% | ||
| PM (TTM) | 19.88% | ||
| GM | 85.57% | ||
| FCFM | 31.15% |
ROA(3y)15.55%
ROA(5y)15.49%
ROE(3y)28.03%
ROE(5y)26.64%
ROIC(3y)20.16%
ROIC(5y)18.92%
ROICexc(3y)28.2%
ROICexc(5y)26.78%
ROICexgc(3y)72.83%
ROICexgc(5y)62.51%
ROCE(3y)25.95%
ROCE(5y)24.28%
ROICexcg growth 3Y4.04%
ROICexcg growth 5Y11.48%
ROICexc growth 3Y-4.84%
ROICexc growth 5Y2.66%
OM growth 3Y4.75%
OM growth 5Y6.92%
PM growth 3Y-0.79%
PM growth 5Y-11.69%
GM growth 3Y-1.39%
GM growth 5Y-0.58%
F-Score5
Asset Turnover0.54
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.49 | ||
| Debt/FCF | 1.56 | ||
| Debt/EBITDA | 1.39 | ||
| Cap/Depr | 60.51% | ||
| Cap/Sales | 2.57% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 96.36% | ||
| Profit Quality | 156.64% | ||
| Current Ratio | 2.82 | ||
| Quick Ratio | 2.67 | ||
| Altman-Z | N/A |
F-Score5
WACC11.3%
ROIC/WACC1.36
Cap/Depr(3y)78.99%
Cap/Depr(5y)69.81%
Cap/Sales(3y)3.02%
Cap/Sales(5y)2.97%
Profit Quality(3y)119.11%
Profit Quality(5y)128.61%
High Growth Momentum
Growth
EPS 1Y (TTM)32.42%
EPS 3Y21.73%
EPS 5Y22.21%
EPS Q2Q%28.91%
EPS Next Y16.01%
EPS Next 2Y15.27%
EPS Next 3Y15.05%
EPS Next 5Y12.88%
Revenue 1Y (TTM)22.29%
Revenue growth 3Y15.81%
Revenue growth 5Y14.72%
Sales Q2Q%20.25%
Revenue Next Year12.12%
Revenue Next 2Y12.12%
Revenue Next 3Y12.02%
Revenue Next 5Y11.65%
EBIT growth 1Y30.05%
EBIT growth 3Y21.31%
EBIT growth 5Y22.65%
EBIT Next Year25.06%
EBIT Next 3Y17.9%
EBIT Next 5Y13.76%
FCF growth 1Y39.78%
FCF growth 3Y2.64%
FCF growth 5Y11.29%
OCF growth 1Y35.98%
OCF growth 3Y4.62%
OCF growth 5Y11.56%