Overall CDNS gets a fundamental rating of 6 out of 10. We evaluated CDNS against 277 industry peers in the Software industry. While CDNS has a great profitability rating, there are some minor concerns on its financial health. CDNS shows excellent growth, but is valued quite expensive already. With these ratings, CDNS could be worth investigating further for growth investing!.

Quickly go to:

1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

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

1.2 Ratios

With an excellent Return On Assets value of 11.05%, CDNS belongs to the best of the industry, outperforming 86.28% of the companies in the same industry.
With an excellent Return On Equity value of 20.41%, CDNS belongs to the best of the industry, outperforming 88.09% of the companies in the same industry.
CDNS has a Return On Invested Capital of 15.75%. This is amongst the best in the industry. CDNS outperforms 92.78% 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 10.78%.
The 3 year average ROIC (20.16%) for CDNS is well above the current ROIC(15.75%). The reason for the recent decline needs to be investigated.

		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

Looking at the Profit Margin, with a value of 20.35%, CDNS belongs to the top of the industry, outperforming 84.48% of the companies in the same industry.
CDNS's Profit Margin has declined in the last couple of years.
With an excellent Operating Margin value of 31.57%, CDNS belongs to the best of the industry, outperforming 93.14% 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 92.78% 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

CDNS has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
Compared to 1 year ago, CDNS has more shares outstanding
CDNS has less shares outstanding than it did 5 years ago.
The debt/assets ratio for CDNS is higher compared to a year ago.

2.2 Solvency

The Debt to FCF ratio of CDNS is 1.68, which is an excellent value as it means it would take CDNS, only 1.68 years of fcf income to pay off all of its debts.
CDNS has a Debt to FCF ratio of 1.68. This is in the better half of the industry: CDNS outperforms 70.40% of its industry peers.
CDNS has a Debt/Equity ratio of 0.48. This is a healthy value indicating a solid balance between debt and equity.
Looking at the Debt to Equity ratio, with a value of 0.48, CDNS is doing worse than 65.34% of the companies in the same industry.
Even though the debt/equity ratio score it not favorable for CDNS, it has very limited outstanding debt, so we won't put too much weight on the DE evaluation.

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

ROIC/WACC1.43

WACC11.04%

2.3 Liquidity

A Current Ratio of 3.05 indicates that CDNS has no problem at all paying 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 75.45% 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's Quick ratio of 2.84 is fine compared to the rest of the industry. CDNS outperforms 74.37% of its industry peers.

		Industry Rank	Sector Rank
Current Ratio	3.05
Quick Ratio	2.84

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WACC

Debt/Equity

How to determine the health of a company

Altman-Z score

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3. Growth

3.1 Past

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

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

Based on estimates for the next years, CDNS will show a quite strong growth in Earnings Per Share. The EPS will grow by 13.14% on average per year.
Based on estimates for the next years, CDNS will show a quite strong growth in Revenue. The Revenue will grow by 11.93% on average per year.

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

Although the future EPS growth is still strong, it is not able to hold up the even more excellent growth rate of the past years.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is stable.

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4. Valuation

4.1 Price/Earnings Ratio

A Price/Earnings ratio of 45.28 indicates a quite expensive valuation of CDNS.
Compared to the rest of the industry, the Price/Earnings ratio of CDNS is on the same level as its industry peers.
Compared to an average S&P500 Price/Earnings ratio of 27.21, CDNS is valued quite expensively.
CDNS is valuated quite expensively with a Price/Forward Earnings ratio of 38.75.
The rest of the industry has a similar Price/Forward Earnings ratio as CDNS.
CDNS's Price/Forward Earnings ratio indicates a rather expensive valuation when compared to the S&P500 average which is at 24.26.

		Industry Rank	Sector Rank
PE	45.28
Fwd PE	38.75

4.2 Price Multiples

61.73% of the companies in the same industry are more expensive than CDNS, based on the Enterprise Value to EBITDA ratio.
Compared to the rest of the industry, the Price/Free Cash Flow ratio of CDNS is on the same level as its industry peers.

		Industry Rank	Sector Rank
P/FCF	58.6
EV/EBITDA	46.34

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
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.