CDNS gets a fundamental rating of 6 out of 10. The analysis compared the fundamentals against 278 industry peers in the Software industry. While CDNS has a great profitability rating, there are some minor concerns on its financial health. CDNS is valued quite expensive, but it does show an excellent growth. These ratings would make CDNS suitable for growth investing!

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

In the past year CDNS was profitable.
In the past year CDNS had a positive cash flow from operations.
Each year in the past 5 years CDNS has been profitable.
CDNS had a positive operating cash flow in each of the past 5 years.

1.2 Ratios

CDNS's Return On Assets of 11.05% is amongst the best of the industry. CDNS outperforms 86.33% of its industry peers.
The Return On Equity of CDNS (20.41%) is better than 88.13% of its industry peers.
CDNS's Return On Invested Capital of 15.75% is amongst the best of the industry. CDNS outperforms 92.81% of its industry peers.
CDNS had an Average Return On Invested Capital over the past 3 years of 20.16%. This is significantly above the industry average of 10.73%.
The last Return On Invested Capital (15.75%) for CDNS is well below the 3 year average (20.16%), which needs to be investigated, but indicates that CDNS had better years and this may not be a problem.

		Industry Rank	Sector Rank
ROA	11.05%
ROE	20.41%
ROIC	15.75%

ROA(3y)15.55%

ROA(5y)15.49%

ROE(3y)28.03%

ROE(5y)26.64%

ROIC(3y)20.16%

ROIC(5y)18.92%

1.3 Margins

CDNS has a better Profit Margin (20.35%) than 84.53% of its industry peers.
In the last couple of years the Profit Margin of CDNS has declined.
Looking at the Operating Margin, with a value of 31.57%, CDNS belongs to the top of the industry, outperforming 93.17% of the companies in the same industry.
CDNS's Operating Margin has improved in the last couple of years.
CDNS's Gross Margin of 85.55% is amongst the best of the industry. CDNS outperforms 92.81% of its industry peers.
CDNS's Gross Margin has been stable in the last couple of years.

		Industry Rank	Sector Rank
OM	31.57%
PM (TTM)	20.35%
GM	85.55%

OM growth 3Y4.75%

OM growth 5Y6.92%

PM growth 3Y-0.79%

PM growth 5Y-11.69%

GM growth 3Y-1.39%

GM growth 5Y-0.58%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so CDNS is creating value.
CDNS has more shares outstanding than it did 1 year ago.
The number of shares outstanding for CDNS has been reduced compared to 5 years ago.
CDNS has a worse debt/assets ratio than last year.

2.2 Solvency

CDNS has a debt to FCF ratio of 1.68. This is a very positive value and a sign of high solvency as it would only need 1.68 years to pay back of all of its debts.
Looking at the Debt to FCF ratio, with a value of 1.68, CDNS is in the better half of the industry, outperforming 70.14% of the companies in the same industry.
A Debt/Equity ratio of 0.48 indicates that CDNS is not too dependend on debt financing.
CDNS has a Debt to Equity ratio of 0.48. This is in the lower half of the industry: CDNS underperforms 65.47% of its industry peers.
Although CDNS does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.

		Industry Rank	Sector Rank
Debt/Equity	0.48
Debt/FCF	1.68
Altman-Z	N/A

ROIC/WACC1.43

WACC10.99%

2.3 Liquidity

CDNS has a Current Ratio of 3.05. This indicates that CDNS is financially healthy and has no problem in meeting its short term obligations.
Looking at the Current ratio, with a value of 3.05, CDNS is in the better half of the industry, outperforming 75.54% of the companies in the same industry.
CDNS has a Quick Ratio of 2.84. This indicates that CDNS is financially healthy and has no problem in meeting its short term obligations.
CDNS has a better Quick ratio (2.84) than 74.46% of its industry peers.

		Industry Rank	Sector Rank
Current Ratio	3.05
Quick Ratio	2.84

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WACC

Debt/Equity

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Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has grown by an impressive 28.52% over the past year.
CDNS shows a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 22.21% yearly.
The Revenue has grown by 19.72% in the past year. This is quite good.
The Revenue has been growing by 14.72% on average over the past years. This is quite good.

EPS 1Y (TTM)28.52%

EPS 3Y21.73%

EPS 5Y22.21%

EPS Q2Q%17.68%

Revenue 1Y (TTM)19.72%

Revenue growth 3Y15.81%

Revenue growth 5Y14.72%

Sales Q2Q%10.15%

3.2 Future

CDNS is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 13.14% yearly.
CDNS is expected to show quite a strong growth in Revenue. In the coming years, the Revenue will grow by 11.93% yearly.

EPS Next Y20.59%

EPS Next 2Y17.31%

EPS Next 3Y16.39%

EPS Next 5Y13.14%

Revenue Next Year13.96%

Revenue Next 2Y13.23%

Revenue Next 3Y12.93%

Revenue Next 5Y11.93%

3.3 Evolution

The estimated forward EPS growth is still strong, although it is decreasing when compared to the stronger growth in the past years.
The Revenue growth rate is stable: in the next years the growth will be about the same than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 42.16, which means the current valuation is very expensive for CDNS.
CDNS's Price/Earnings is on the same level as the industry average.
Compared to an average S&P500 Price/Earnings ratio of 28.30, CDNS is valued a bit more expensive.
A Price/Forward Earnings ratio of 36.08 indicates a quite expensive valuation of CDNS.
The rest of the industry has a similar Price/Forward Earnings ratio as CDNS.
The average S&P500 Price/Forward Earnings ratio is at 25.57. CDNS is valued slightly more expensive when compared to this.

		Industry Rank	Sector Rank
PE	42.16
Fwd PE	36.08

4.2 Price Multiples

Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of CDNS indicates a somewhat cheap valuation: CDNS is cheaper than 60.79% of the companies listed in the same industry.
CDNS's Price/Free Cash Flow is on the same level as the industry average.

		Industry Rank	Sector Rank
P/FCF	54.56
EV/EBITDA	44.06

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates CDNS does not grow enough to justify the current Price/Earnings ratio.
The excellent profitability rating of CDNS may justify a higher PE ratio.
CDNS's earnings are expected to grow with 16.39% in the coming years. This may justify a more expensive valuation.