Cadence Design Systems Inc (CDNS, Financial) has recently captured the attention of investors and financial analysts, thanks to its strong financial position. With a current share price of $295.88 and a daily gain of 1.04%, despite a slight three-month decline of -2.22%, the company shows promising signs of substantial growth. A detailed analysis, supported by the GF Score, positions Cadence Design Systems Inc for significant future success.
What Is the GF Score?
The GF Score is a proprietary ranking system from GuruFocus, assessing stocks based on five key valuation aspects. This system, which has been backtested from 2006 to 2021, correlates closely with long-term stock performance. Stocks with higher GF Scores typically yield better returns. The GF Score ranges from 0 to 100, with 100 indicating the highest potential for outperformance. Cadence Design Systems Inc boasts a GF Score of 94, signaling strong future performance potential.
- Financial strength rank: 8/10
- Profitability rank: 10/10
- Growth rank: 10/10
- GF Value rank: 3/10
- Momentum rank: 10/10
Understanding Cadence Design Systems Inc's Business
Cadence Design Systems is a leading provider of electronic design automation (EDA) software, intellectual property, and system design and analysis products. With a market cap of $80.52 billion and annual sales of $4.08 billion, the company plays a crucial role in automating the chip design process. This automation enhances design accuracy, productivity, and complexity in a comprehensive end-to-end solution. Cadence's extensive portfolio benefits from the convergence of semiconductor companies moving up-stack toward systems-like companies, and systems companies moving down-stack toward in-house semiconductor design. This expansion in EDA customers, coupled with the secular digitalization of various end markets, positions Cadence for continued growth.
Financial Strength and Stability
Cadence Design Systems Inc's financial strength is evident in its robust balance sheet and impressive Interest Coverage ratio of 33.41, significantly above the benchmark set by Benjamin Graham. The company's Altman Z-Score of 25.02 further underscores its financial stability, indicating a strong defense against financial distress. A Debt-to-Revenue ratio of 0.16 showcases Cadence's strategic debt management, reinforcing its financial health.
Profitability and Growth Metrics
The Profitability Rank highlights Cadence Design Systems Inc's superior ability to generate profits, with an Operating Margin that has consistently increased over the past five years. The company's Predictability Rank of 4.0 stars reflects its consistent operational performance. Additionally, Cadence's commitment to growth is evident in its 16.1% 3-Year Revenue Growth Rate, outperforming 67.18% of its industry peers.
Conclusion: A Strong Candidate for Market Outperformance
Considering Cadence Design Systems Inc's robust financial strength, impressive profitability, and consistent growth metrics, the GF Score highlights the company's unparalleled position for potential market outperformance. Investors seeking similar opportunities can explore more companies with strong GF Scores using the 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.
