CDNS Cadence Design Systems, Inc. - Fundamental Analysis
BULLISH
CDNS Stock | Fundamental Analysis & Investment Insights
NASDAQ
•
Technology
•
Software - Application
Current Price
$314.93
Analyst Target
$381.64
+21.2% Upside
52W High
$376.45
52W Low
$221.56
AI Analysis
Powered by advanced machine learning algorithms
Confidence Score
88%
Analysis Accuracy
Cadence Design Systems (CDNS) exhibits strong fundamental performance with consistent double-digit earnings growth, industry-leading margins, and robust ROE, all within a high-growth semiconductor design software ecosystem. Despite a premium valuation (P/E 81.4, Forward P/E 46.0), the stock appears reasonably priced relative to its growth trajectory and sector peers, many of whom trade at even higher multiples despite weaker profitability. The company has delivered 22 out of 25 earnings beats over the past six years with accelerating YoY EPS growth of 17.7%, underscoring durable execution and demand tailwinds from AI, HPC, and advanced node adoption. While insider selling raises a cautionary note, analyst consensus remains solidly bullish with a $381.64 target implying 21% upside, and balance sheet strength supports continued reinvestment and resilience.
Key Strengths
Exceptional profitability with gross margin of 85.55% and operating margin of 35.09%, among the highest in the software and semiconductor tools sector
Strong earnings momentum: 20.7% YoY EPS growth and 17.7% most recent YoY EPS increase, with 22 of last 25 quarters beating estimates
Superior return metrics: ROE of 21.74% significantly exceeds sector average of 25.86% and peer SNPS (6.50%)
Healthy financial position with low leverage (Debt/Equity: 0.48) and strong liquidity (Current Ratio: 3.05)
Strategic positioning in high-growth areas including AI chip design, EDA tools, and system design enablement, driving sustained revenue growth of 10.1% YoY
Key Risks
Premium valuation: P/E of 81.38 and Price/Sales of 16.50 are elevated even within a high-multiple sector, increasing sensitivity to growth deceleration
Recent insider selling: $16.84M in sales over last 6 months including CEO and CFO, signaling potential lack of confidence at the top
Limited free cash flow and cash/debt transparency: critical metrics like FCF, total cash, and EV are unavailable, reducing visibility into capital allocation flexibility
Forward P/E compression risk: despite strong growth, multiple contraction could occur if macro conditions or tech spending weaken
Relative underperformance in price momentum: -2.8% over 1 month and +3.9% over 1 year lag behind peers like Snowflake (+98.8% 1Y return)
AI Fair Value Estimate
Based on comprehensive analysis
$381.64
+21.2% above current price
Performance Snowflake
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Stock Price & Analyst Targets
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Historical Performance Trends
Long-term financial metrics and growth patterns
Valuation Metrics
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Profitability, Growth & Financial Health
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Sector Comparison & Peer Analysis
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Insider Trading & Analyst Ratings
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