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Following the merger, Cadence quickly established itself as a leader in the EDA space, providing cutting-edge solutions for complex design challenges. Over the years, the company has continued to innovate and expand its product portfolio, catering to the evolving needs of the semiconductor industry. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Cadence is rated Zacks Rank #3 (Hold). Cadence Design Systems is well-positioned to capitalize on several growth opportunities in the semiconductor landscape. With the increasing demand for more complex and power-efficient chips, the company's expertise in advanced node design and low-power solutions becomes critical. The rising prominence of artificial intelligence, machine learning, and data center technologies offers significant growth potential for Cadence.
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With a background in engineering and leadership positions in the semiconductor industry, he brings a strategic vision and a focus on driving growth and innovation at Cadence. Given that Cadence Design Systems doesn't pay any regular dividends to its shareholders, we infer that the company has been reinvesting all of its profits to grow its business. As a next step, we compared Cadence Design Systems' net income growth with the industry and were disappointed to see that the company's growth is lower than the industry average growth of 15% in the same period. First thing first, we like that Cadence Design Systems has an impressive ROE.
What Has ROE Got To Do With Earnings Growth?
Investors Still Waiting For A Pull Back In Cadence Design Systems, Inc. (NASDAQ:CDNS) - Simply Wall St
Investors Still Waiting For A Pull Back In Cadence Design Systems, Inc. (NASDAQ:CDNS).
Posted: Sat, 20 Apr 2024 13:05:56 GMT [source]
Firstly, we acknowledge that Cadence Design Systems has a significantly high ROE. Secondly, even when compared to the industry average of 9.6% the company's ROE is quite impressive. This probably laid the groundwork for Cadence Design Systems' moderate 12% net income growth seen over the past five years. Compared to the Zacks Consensus Estimate of $1.01 billion, the reported revenues represent a surprise of -0.49%.
Industry Products
And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system.
Cadence Design Systems, Inc.'s (NASDAQ:CDNS) Stock's On An Uptrend: Are Strong Financials Guiding The Market?
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Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings. Cadence Design Systems (CDNS Quick QuoteCDNS - Free Report) has recently been on Zacks.com's list of the most searched stocks. Gain deeper insights into company revenues with a detailed analysis of revenue sources. Explore the updated Options feature, providing in-depth data, and a 3D viewing option.
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For the current quarter, Cadence is expected to post earnings of $1.28 per share, indicating a change of +4.9% from the year-ago quarter. Cadence Design Systems' stock is owned by a variety of institutional and retail investors. Top institutional shareholders include Bank of New York Mellon Corp (0.74%), Sumitomo Mitsui Trust Holdings Inc. (0.27%), Allspring Global Investments Holdings LLC (0.23%), Assenagon Asset Management S.A. (0.22%), Los Angeles Capital Management LLC (0.18%) and Global Assets Advisory LLC (0.14%).
Cadence Design Systems Inc. stock underperforms Thursday when compared to competitors - MarketWatch
Cadence Design Systems Inc. stock underperforms Thursday when compared to competitors.
Posted: Thu, 28 Mar 2024 07:00:00 GMT [source]
Declining Stock and Solid Fundamentals: Is The Market Wrong About Cadence Design Systems, Inc. (NASDAQ:CDNS)?
The company specializes in providing software, hardware, and silicon structures that facilitate the design of integrated circuits, systems on chips (SoCs), and printed circuit boards. The history of Cadence Design Systems traces back to 1988, when the company was formed through the merger of SDA Systems and ECAD, Inc. SDA Systems was founded in 1983 by Dr. Alberto Sangiovanni-Vincentelli and Dr. Richard Newton, and it was known for its innovations in circuit design technology. ECAD, Inc. was a pioneer in electronic design software and had a strong presence in the EDA market.
675 employees have rated Cadence Design Systems Chief Executive Officer Lip-Bu Tan on Glassdoor.com. This puts Lip-Bu Tan in the top 20% of approval ratings compared to other CEOs of publicly-traded companies. Cadence is graded F on this front, indicating that it is trading at a premium to its peers.
Zacks may license the Zacks Mutual Fund rating provided herein to third parties, including but not limited to the issuer. While Cadence Design Systems has exhibited strong financial performance and a solid market position, it has risks and challenges. One potential risk is the highly competitive nature of the EDA industry, with several players offering similar products and services. Price competition and the need to continually innovate to stay ahead are inherent challenges in this market. Moreover, the semiconductor industry is subject to cyclical fluctuations, influenced by economic conditions, geopolitical tensions, and supply chain disruptions. Any slowdown in the global economy or adverse industry conditions could impact Cadence's revenue growth.
Any perceived risks or uncertainties in the semiconductor industry could impact investor perception of Cadence's future growth prospects. Nevertheless, we remain optimistic about the burgeoning adoption of electronic design automation tools driven by chip demand from artificial intelligence. Despite the drop in share price, we still view the current stock as slightly overvalued. Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well.
As of April 15th, there was short interest totaling 2,460,000 shares, a drop of 10.5% from the March 31st total of 2,750,000 shares. Based on an average daily trading volume, of 1,540,000 shares, the days-to-cover ratio is presently 1.6 days. Cadence Design Systems doesn't pay any dividend currently which essentially means that it has been reinvesting all of its profits into the business. This definitely contributes to the decent earnings growth number that we discussed above. We then compared Cadence Design Systems' net income growth with the industry and found that the company's growth figure is lower than the average industry growth rate of 17% in the same 5-year period, which is a bit concerning.
Cadence shares remained in a steady uptrend between January 2023 and March of this year, apart from several minor retracements to the 50-day moving average. However, more recently, the price continues to track lower, with the stock last week breaking down below an established 16-month trendline. Amid earnings-related weakness, investors should monitor how the shares respond to a zone of support between a key horizontal line and the 200-day moving average from $247 to $266. Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. Put another way, it reveals the company's success at turning shareholder investments into profits.
One way to conceptualize this is that for each $1 of shareholders' capital it has, the company made $0.31 in profit. The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates three times over this period. Cadence reported revenues of $1.01 billion in the last reported quarter, representing a year-over-year change of -1.2%. Zacks Earnings ESP (Expected Surprise Prediction) looks to find companies that have recently seen positive earnings estimate revision activity. The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season.
That means that for every $1 worth of shareholders' equity, the company generated $0.31 in profit. A dynamic and experienced management team leads cadence Design Systems with deep expertise in the semiconductor and technology sectors. Dr. Anirudh Devgan, a seasoned executive, assumed the role of Chief Executive Officer and President in December 2021.
The Zacks Industry Rank assigns a rating to each of the 265 X (Expanded) Industries based on their average Zacks Rank. We’d like to share more about how we work and what drives our day-to-day business.
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