Cadence Design Systems Inc (CDNS, Financial) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $276.12, Cadence Design Systems Inc has witnessed a daily loss of 0.52%, marked against a three-month change of 10.4%. A thorough analysis, underlined by the GF Score, suggests that Cadence Design Systems Inc is well-positioned for substantial growth in the near future.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 8/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 6/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With high ranks in financial strength, profitability, and growth, but a lower GF Value rank, GuruFocus assigned Cadence Design Systems Inc the GF Score of 92 out of 100, which signals the highest outperformance potential.
Understanding Cadence Design Systems Inc's Business
Cadence Design Systems Inc, with a market cap of $75.12 billion and sales of $3.92 billion, operates at the forefront of electronic design automation (EDA) software, intellectual property, and system design and analysis products. The company's 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. Benefiting from the convergence of semiconductor and systems companies, Cadence Design Systems Inc's comprehensive portfolio is well-positioned to capitalize on the secular digitalization of various end markets, providing a competitive edge to EDA vendors like Cadence.
Financial Strength Breakdown
Cadence Design Systems Inc's Financial Strength rating reflects a resilient balance sheet capable of withstanding financial volatility, indicative of a well-managed capital structure. The company's Interest Coverage ratio of 31.35 is a testament to its ability to comfortably cover interest obligations, aligning with the principles of legendary investor Benjamin Graham. Furthermore, an Altman Z-Score of 22.29 signals strong defense against financial distress, and a Debt-to-Revenue ratio of 0.17 showcases Cadence Design Systems Inc's strategic debt management, reinforcing its financial health.
Profitability Rank Breakdown
The Profitability Rank of Cadence Design Systems Inc highlights its superior ability to generate profits compared to its peers. The company's Operating Margin has shown a consistent increase over the past five years, with a notable rise from 21.42% in 2019 to 26.31% in 2023. This trend reflects Cadence Design Systems Inc's growing efficiency and profitability. The Piotroski F-Score further confirms the company's solid financial situation, while a Predictability Rank of 3.5 stars out of five emphasizes its consistent operational performance, instilling investor confidence.
Growth Rank Breakdown
Cadence Design Systems Inc's high Growth Rank underscores its commitment to business expansion. The company's 3-Year Revenue Growth Rate of 15.9% surpasses 66.75% of companies in the Software industry. Additionally, Cadence Design Systems Inc has experienced a significant increase in EBITDA, with a three-year growth rate of 25.5 and a five-year rate of 21.9, highlighting its sustained growth capabilities.
Conclusion: Cadence Design Systems Inc's Path to Outperformance
Considering Cadence Design Systems Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential outperformance. The company's strategic approach to financial management, consistent profitability, and commitment to growth are key drivers that make Cadence Design Systems Inc an attractive prospect for value investors. With a GF Score of 92, Cadence Design Systems Inc stands out as a strong contender in the market, poised for future success.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
