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Cadence Design Systems Intrinsic Value: DCF (Earnings Based)

: $87.69 (As of Today)
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As of today (2021-11-27), Cadence Design Systems's intrinsic value calculated from the Discounted Earnings model is $87.69.

Note: Discounted Earnings model is only suitable for predictable companies (Business Predictability Rank higher than 1-Star). If the company's predictability rank is 1-Star or Not Rated, result may not be accurate due to the low predictability of business and the data will not be stored into our database.

Cadence Design Systems's Predictability Rank is 4-Stars.

Margin of Safety (Earnings Based) using Discounted Earnings model for Cadence Design Systems is -103.40%.

The historical rank and industry rank for Cadence Design Systems's Intrinsic Value: DCF (Earnings Based) or its related term are showing as below:

NAS:CDNS' s Price-to-Intrinsic-Value-DCF (Earnings Based) Range Over the Past 10 Years
Min: 1.59   Med: 2.35   Max: 5.49
Current: 2.03

1.59
5.49

During the past 13 years, the highest Price-to-Intrinsic-Value-DCF (Earnings Based) Ratio of Cadence Design Systems was 5.49. The lowest was 1.59. And the median was 2.35.

NAS:CDNS's Price-to-Intrinsic-Value-DCF (Earnings Based) is ranked lower than
99.99% of the 18 Companies
in the Software industry.

( Industry Median: 0.94 vs. NAS:CDNS: 2.03 )

Cadence Design Systems Intrinsic Value: DCF (Earnings Based) Historical Data

The historical data trend for Cadence Design Systems's Intrinsic Value: DCF (Earnings Based) can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Cadence Design Systems Annual Data
Trend Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20
Intrinsic Value: DCF (Earnings Based)
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only - - - - 82.77

Cadence Design Systems Quarterly Data
Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21
Intrinsic Value: DCF (Earnings Based) Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only - 82.77 82.74 85.93 87.69

Cadence Design Systems Intrinsic Value: DCF (Earnings Based) Calculation

This is the intrinsic value calculated from the Discounted Earnings model with default parameters. The calculation method is the same as Discounted Cash Flow model except earnings are used in the calculation instead of free cash flow. This is the default method of calculation with GuruFocus DCF calculator.

Usually a two-stage model is used in calculating the intrinsic value with discounted cash flow model. The first stage is called growth stage; the second is called the terminal stage. In the growth stage the company grows at a faster rate. Because it cannot grow at that rate forever, a lower rate is used for the terminal stage.

GuruFocus DCF calculator is a two-stage model. The default values are defined as:

1. Discount Rate: d = 8%
A reasonable discount rate assumption should be at least the long term average return of the stock market, which can be estimated from risk free rate plus risk premium of stock market. We used the 10-Year Treasury Constant Maturity Rate as the risk free rate and rounded up to the nearest integer, then added a risk premium of 6% to get the estimated discount rate. Some investors use their expected rate of return, which is also reasonable. A typical discount rate can be anywhere between 6% - 20%.

2. Growth Rate in the growth stage: g1 = 17.50%
Growth Rate in the growth stage = average earnings growth rate in the past 10 years. If it is higher than 20%, we use 20%. If it is less than 5%, we use 5% instead. => Average Earnings Growth Rate in the past 10 years was 17.50% which is less than 20% and higher than 5% => Growth Rate: 17.50%

3. Years of Growth Stage: y1 = 10

4. Terminal Growth Rate: g2 = 4%

5. Years of Terminal Growth: y2 = 10

6. EPS without NRI: eps without nri = $2.480.
GuruFocus DCF calculator is actually a Discounted Earnings calculator, the Earnings Per Share without NRI is used as the default. The reason we are doing this is we found that historically stock prices are more correlated with earnings than free cash flow.

All of the default settings can be changed and the results are calculated automatically.

Cadence Design Systems's Intrinsic Value: DCF (Earnings Based) for today is calculated as:

Intrinsic Value: DCF (Earnings Based)=Earnings per Share (Diluted)*{[(1+g1)/(1+d)+(1+g1)^2/(1+d)^2+...+(1+g1)^10/(1+d)^10]
+(1+g1)^10/(1+d)^10*[(1+g2)/(1+d)+(1+g2)^2/(1+d)^2+...+(1+g2)^10/(1+d)^10]}

set x = (1+g1)/(1+d) = (1+0.175)/(1+0.08) = 1.087962962963
and y = (1+g2)/(1+d) = (1+0.04)/(1+0.08) = 0.96296296296296

Intrinsic Value: DCF (Earnings Based)=Earnings per Share (Diluted)*{[x+x^2+...+x^10]+x^10*[y+y^2+...+y^10]}
=Earnings per Share (Diluted)*[x*(1-x^10)/(1-x)+x^10*y*(1-y^10)/(1-y)]
=2.480*35.3603
=87.69

Margin of Safety % (DCF Earnings Based)=(Intrinsic Value: DCF (Earnings Based)-Current Price)/Intrinsic Value: DCF (Earnings Based)
=(87.69-178.36)/87.69
=-103.40 %

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.


Cadence Design Systems  (NAS:CDNS) Intrinsic Value: DCF (Earnings Based) Explanation

Unlike valuation methods such as Net Current Asset Value, Tangible Book Value per Share, Graham Number, Median Ratio etc, discounted Cash Flow model evaluates the companies based on their future earnings power instead of their assets.


Be Aware

What you need to know about Discounted Earnings model:

1. The Discounted Earnings model evaluates a company based on its future earnings power
2. Growth is taken into account; therefore a faster growth company is worth more if everything else is the same.
3. Since we are projecting future growth, it is assumed that the company will grow at the same rate as it did during the past 10 years. Therefore this model works better for the companies that are relatively consistent performers.
4. The Discounted Earnings model works poorly for inconsistent performers like cyclicals.
5. Your expected return from the investment is a reasonable discount rate assumption.
6. A larger margin of safety should be required for companies with less predictable businesses.

You can screen for stocks that trade below their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) with the GuruFocus All-in-One Screener. Companies with a high Predictability Rank that trade at a discount to their Intrinsic Value: DCF (FCF Based) and Intrinsic Value: DCF (Earnings Based) can be found in the screen of Undervalued Predictable Companies.


Cadence Design Systems Intrinsic Value: DCF (Earnings Based) Related Terms

Thank you for viewing the detailed overview of Cadence Design Systems's Intrinsic Value: DCF (Earnings Based) provided by GuruFocus.com. Please click on the following links to see related term pages.


Cadence Design Systems Business Description

Cadence Design Systems logo
Industry
Technology » Software NAICS : 511210 SIC : 7372
Traded in Other Exchanges
Address
2655 Seely Avenue, Building 5, San Jose, CA, USA, 95134
Cadence Design Systems was founded in 1988 after the merger of ECAD and SDA Systems. Cadence is known as an electronic design automation, or EDA, firm that specializes in developing software, hardware, and intellectual property that automates the design and verification of integrated circuits or larger chip systems. Historically, semiconductor firms have relied on the firm's tools, but there has been a shift toward other nontraditional "systems" users given the development of the Internet of Things, artificial intelligence, autonomous vehicles, and cloud computing. Cadence is headquartered in Silicon Valley, has approximately 8,100 employees worldwide, and was added to the S&P 500 in late 2017.
Executives
Teng Chin-chi officer: Sr. Vice President 2655 SEELY AVENUE SAN JOSE CA 95134
Tan Lip Bu director, officer: CEO ONE CALIFORNIA STREET 28TH FLOOR SAN FRANCISCO CA 94111
Beckley Thomas P officer: Sr. Vice President 2655 SEELY AVENUE SAN JOSE CA 95134
Wall John M officer: Sr. VP & CFO 2655 SEELY AVENUE SAN JOSE CA 95134
Mandava Surendra Babu officer: Sr. Vice President 47211 LAKEVIEW BLVD FREMONT CA 94538
Devgan Anirudh officer: President 2655 SEELY AVENUE SAN JOSE CA 95134
Zaman Aneel officer: Sr. Vice President 2655 SEELY AVENUE SAN JOSE CA 95134
Bostrom Susan L director PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> Ownership Information: BOSTROM SUSAN L a.header:link {color: #3b4fae; font-weight: bold; text-decoration: underline;} a.header:visited {color: #3b4fae; font-weight: bold; text-decoration: underline;} a.header:hover {color: #191970;}
Flaminia Alinka officer: Sr. VP, Chief Legal Officer 3975 FREEDOM CIRCLE SANTA CLARA CA 95054
Siboni Roger S director 1900 SOUTH NORFOLK STREET SAN MATEO CA 94403
Cowie James J officer: Sr. VP, General Counsel 2655 SEELY AVENUE BLDG. 5 SAN JOSE CA 95134
Chew Lewis director DOLBY LABORATORIES, INC. 1275 MARKET STREET SAN FRANCISCO CA 94103
Brennan Ita M director 5453 GREAT AMERICA PARKWAY SANTA CLARA CA 95054
Adams Mark director 834 TERRACE DRIVE LOS ALTOS CA 94024
Wilderotter Mary Agnes director 115 ALPINE TERRACE OAKLAND CA 94618

Cadence Design Systems Headlines

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