Cadence Design (CDNS) AI Stock Analysis

• Market Cap: $84.14B
• Dividend Yield: N/A
• Average Volume (3M): 2.41M
• Price to Earnings (P/E): 78.0
• Beta (1Y): 1.61
• Revenue Growth: 19.55%
• EPS Growth: 2.35%
• Country: US
• Employees: 12,837
• Sector: Technology
• Sector Strength: 68
• Industry: Software - Application
• EPS (TTM): 3.95
• Shares Outstanding: 273,042,000
• 10 Day Avg. Volume: 2,341,566
• 30 Day Avg. Volume: 2,405,666
• PEG Ratio: 33.15
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 0.82
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 15.64
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $322.57
• Price Target Upside: 4.68% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 15

Cadence Design Systems scores strongly due to its robust financial performance and positive earnings call, which highlight significant growth and strategic advancements. However, the stock's high valuation and technical indicators suggest caution, as it approaches overbought territory. The company's prudence regarding the China market and potential trade impacts are additional considerations, but its strong fundamentals and strategic positioning in the software industry support a favorable outlook.

Positive Factors

Market Share Opportunity

Cadence Design Systems is expected to achieve resilient double-digit sales growth driven by increasing chip complexity.

Partnerships

The company talked about its expanded partnership with NVDA and developing agentic AI solutions with the leading GPU maker.

Negative Factors

Currency Impact

CDNS pointed to weakening USD as a potential margin headwind.

Earnings Valuation

EDA stocks, including Cadence, trade at a more premium PEG ratio, creating a headwind when earnings upgrades are modest compared to other growth stocks.

Cadence Design Business Overview & Revenue Model

Company Description

Cadence Design Systems, Inc. provides software, hardware, services, and reusable integrated circuit (IC) design blocks worldwide. The company offers functional verification services, including emulation and prototyping hardware. Its functional verification offering consists of JasperGold, a formal verification platform; Xcelium, a parallel logic simulation platform; Palladium, an enterprise emulation platform; and Protium, a prototyping platform for chip verification. The company also provides digital IC design and sign off products, including Genus logic synthesis and Joules RTL power solutions, as well as Modus software solution to reduce systems-on-chip design-for-test time; physical implementation tools, such as place and route, optimization, and multiple patterning preparation; and signoff products to signoff the design as ready for silicon manufacturing. In addition, it offers custom IC design and simulation products to create schematic and physical representations of circuits down to the transistor level for analog, mixed-signal, custom digital, memory, and radio frequency designs; and system design and analysis products to develop printed circuit boards and IC packages, as well as to analyze electromagnetic, electro-thermal, and other multi-physics effects. Further, the company provides intellectual property (IP) products comprising pre-verified and customizable functional blocks to integrate into customer's ICs; and verification IP and memory models to emulate and model the expected behavior and interaction of standard industry system interface protocols. Additionally, it offers services related to methodology, education, and hosted design solutions, as well as technical support and maintenance services. The company serves 5G communications, aerospace and defense, automotive, industrial and healthcare, mobile, consumer, and hyperscale computing markets. Cadence Design Systems, Inc. was incorporated in 1987 and is headquartered in San Jose, California.

How the Company Makes Money

Cadence Design Systems generates revenue primarily through the sale of software licenses, maintenance and support services, and subscriptions. The company's revenue model is built on providing sophisticated EDA tools and IP solutions that address the complex design requirements of its customers. Key revenue streams include the sale of perpetual licenses for its software, which allow customers to use the software indefinitely, and time-based licenses or subscriptions, which provide access to the software for a specific period. Additionally, Cadence offers maintenance and support services, which provide customers with software updates and technical assistance. The company also earns revenue from its IP segment by licensing semiconductor IP to customers, which can be integrated into their own chip designs. Strategic partnerships with leading semiconductor companies and an emphasis on innovation and R&D are significant factors contributing to Cadence's earnings, allowing the company to remain competitive and meet the evolving demands of the electronics industry.

Cadence Design Financial Statement Overview

Summary

Cadence Design's financial statements reveal a well-managed company with robust revenue growth, strong profitability margins, and a solid balance sheet. The company's ability to generate consistent free cash flow further solidifies its financial position, enabling strategic reinvestment and shareholder value creation. While the company maintains moderate leverage, its strong equity base and effective cost management mitigate potential risks, positioning the company well in the competitive software application industry.

Income Statement

Cadence Design exhibits strong profitability with a consistent increase in total revenue and substantial growth in net income over the years. The company maintains an excellent gross profit margin, indicating effective cost management and pricing strategies. The net profit margin and EBIT margin are solid, showcasing operational efficiency. Revenue growth remains robust, with a positive trajectory over multiple periods, reinforcing the company's competitive position in the market.

Balance Sheet

The balance sheet reflects a solid financial structure with a strong equity position, evidenced by a high equity ratio. The company's debt-to-equity ratio suggests a balanced approach to leveraging, minimizing financial risks. Return on equity is impressive, indicating effective use of shareholders' capital to generate income. The stability in stockholders' equity growth supports long-term business sustainability and financial health.

Cash Flow

Cadence Design showcases a strong cash flow position with consistent growth in free cash flow, reflecting efficient capital management and operational success. The operating cash flow to net income ratio is healthy, suggesting high-quality earnings. The free cash flow to net income ratio further supports strong liquidity and the potential for reinvestment or shareholder returns. The company demonstrates effective cash flow management, contributing to overall financial stability.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Mar 2022	Mar 2021
Income Statement		Total Revenue
4.64B	4.09B	3.56B	2.99B	2.68B
	Gross Profit
4.43B	3.65B	3.19B	2.68B	2.38B
	EBIT
1.35B	1.25B	1.07B	779.09M	645.55M
	EBITDA
1.66B	1.42B	1.20B	927.72M	799.15M
	Net Income Common Stockholders
1.06B	1.04B	848.95M	695.96M	590.64M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.78B	1.14B	882.33M	1.09B	928.43M
	Total Assets
8.97B	5.67B	5.14B	4.39B	3.95B
	Total Debt
2.59B	806.03M	748.08M	347.59M	346.79M
	Net Debt
-58.95M	-202.12M	-134.25M	-741.35M	-581.64M
	Total Liabilities
4.30B	2.27B	2.39B	1.65B	1.46B
	Stockholders Equity
4.67B	3.40B	2.75B	2.74B	2.49B
Cash Flow		Free Cash Flow
1.12B	1.25B	1.12B	1.03B	810.11M
	Operating Cash Flow
1.26B	1.35B	1.24B	1.10B	904.92M
	Investing Cash Flow
-837.12M	-412.25M	-738.63M	-292.95M	-292.16M
	Financing Cash Flow
1.24B	-803.57M	-657.05M	-643.79M	-415.29M

Cadence Design Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 308.15
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CDNS, the sentiment is Positive. The current price of 308.15 is above the 20-day moving average (MA) of 268.05, above the 50-day MA of 258.38, and above the 200-day MA of 278.22, indicating a bullish trend. The MACD of 11.81 indicates Negative momentum. The RSI at 69.04 is Neutral, neither overbought nor oversold. The STOCH value of 92.22 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CDNS.

Cadence Design Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CDNS	80 Outperform	$84.14B	78.04	25.92%	―	19.55%	2.35%
PAYC	78 Outperform	$13.15B	25.50	34.88%	0.66%	11.19%	51.03%
ANSS	78 Outperform	$28.90B	48.81	10.23%	―	15.98%	35.52%
PCTY	77 Outperform	$10.47B	48.09	19.70%	―	15.96%	31.76%
ADSK	73 Outperform	$59.64B	54.64	49.69%	―	12.35%	22.28%
MANH	71 Outperform	$11.14B	52.28	89.60%	―	9.18%	14.35%
Sector *	60 Neutral	$10.94B	10.58	-7.08%	2.98%	7.52%	-12.04%

Cadence Design Corporate Events

Cadence Design Welcomes Industry Veteran to Board

Cadence Design Systems has appointed Moshe Gavrielov to its board of directors, effective January 1, 2025. Gavrielov brings extensive industry experience, having previously served as CEO of Xilinx and in executive roles at Cadence and other technology firms. His appointment is seen as a strategic move to leverage his expertise to drive growth and enhance shareholder value, aligning with Cadence’s focus on innovation in the AI era.