CADENCE DESIGN SYSTEMS INC (CDNS) Stock Analysis
CADENCE DESIGN SYSTEMS INC (CDNS) Stock Analysis
Analysis from 10-Q filed 2025-10-29. Data as of Q4 2025.
Overall Grade: F (Concerning)
CADENCE DESIGN SYSTEMS INC faces challenges in financial performance that warrant careful analysis.
| Metric | Value | Context |
|---|---|---|
| ROIC | 16.7% | Solid returns |
| FCF Margin | 30.0% | Strong cash generation |
| Debt/Equity | 0.0x | Conservative leverage |
Investment Thesis: Strong return on invested capital of 16.7% suggests durable competitive advantages and efficient capital allocation.
Explore CADENCE DESIGN SYSTEMS INC: Earnings History | Filing Intelligence | ROIC Analysis
Profitability: CADENCE DESIGN SYSTEMS INC earns 16.7% ROIC, Top 25% in Technology
CADENCE DESIGN SYSTEMS INC's trailing-twelve-month ROIC of 16.7% ranks Top 25% in Technology companies (sector median: 5.2%), driven by NOPAT margin of 20.5% combined with asset turnover of 0.6x. Source: 10-Q filed 2025-10-29.
| Metric | CDNS | Rating | Context |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 16.7% | Good | Above sector median of 5.2% |
| Return on Equity (ROE) | 22.1% | Excellent | Efficient use of shareholder equity |
| Operating Margin | 28.2% | Excellent | Efficient operations |
Cash Flow: CADENCE DESIGN SYSTEMS INC generates $1.6B FCF at 30.0% margin, positive NaN/8 quarters
CADENCE DESIGN SYSTEMS INC generated $1.6B in free cash flow (TTM), a 30.0% FCF margin, a margin that ranks Top 25% in Technology. Operating cash flow exceeds net income by 1.6x, indicating high earnings quality. FCF was positive in N/A of the last 8 quarters. Source: 10-Q filed 2025-10-29.
| Metric | CDNS | Rating | Context |
|---|---|---|---|
| Free Cash Flow Margin | 30.0% | Excellent | Excellent cash conversion |
| Free Cash Flow (TTM) | $1.6B | Good | Positive cash generation |
| OCF/Net Income | 1.6x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
Balance Sheet: CADENCE DESIGN SYSTEMS INC at 0.0x leverage
CADENCE DESIGN SYSTEMS INC's debt-to-equity ratio of 0.0x reflects conservative leverage. Source: 10-Q filed 2025-10-29.
| Metric | CDNS | Rating | Context |
|---|---|---|---|
| Debt to Equity | 0.0x | Excellent | Conservative capital structure |
Valuation: CADENCE DESIGN SYSTEMS INC trades at 76.2x earnings
CADENCE DESIGN SYSTEMS INC trades at a P/E of 76.2x. Free cash flow yield of 1.9% reflects market expectations for growth.
| Metric | CDNS | Rating | Context |
|---|---|---|---|
| P/E Ratio | 76.2x | Warning | Premium valuation |
| EV/Sales | 15.5x | Warning | Growth premium priced in |
| FCF Yield | 1.9% | Warning | Lower cash yield |
Capital Allocation: CADENCE DESIGN SYSTEMS INC returns 1.1% shareholder yield
CADENCE DESIGN SYSTEMS INC's total shareholder yield is 1.1% (dividends + buybacks 1.1%). Source: 10-Q filed 2025-10-29.
| Metric | CDNS | Rating | Context |
|---|---|---|---|
| Total Shareholder Yield | 1.1% | Adequate | Dividend + buyback yield combined |
| Buyback Yield | 1.1% | Adequate | Minimal buyback activity |
| Total Capital Returned (TTM) | $925.0M | Good | Dividends + buybacks returned to shareholders |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 16.7% | Top 25% | 3.2x above |
| Free Cash Flow Margin | 30.0% | Top 25% | 3.3x above |
| Operating Margin | 28.2% | Top 25% | 5.8x above |
| Return on Equity (ROE) | 22.1% | Top 25% | 4.5x above |
| P/E Ratio | 76.2x | N/A | - |
Financial Scorecard
| Metric | CDNS | Rating | Sector Context |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 16.7% | Good | Top 25% of sector (median: 5.2%) |
| Free Cash Flow Margin | 30.0% | Excellent | Top 25% of sector (median: 9.1%) |
| Debt to Equity Ratio | 0.0% | Excellent | Conservative capital structure |
| P/E Ratio (Price-to-Earnings) | 76.2x | Warning | High expectations priced in |
| Free Cash Flow Yield | 1.9% | Warning | Growth-focused valuation |
Frequently Asked Questions
Q: What is CADENCE DESIGN SYSTEMS INC's Return on Invested Capital (ROIC)?
CADENCE DESIGN SYSTEMS INC (CDNS) has a trailing twelve-month Return on Invested Capital (ROIC) of 16.7%. This compares above the sector median of 5.2%. An ROIC between 12-20% indicates solid capital allocation and sustainable competitive position.
Q: What is CADENCE DESIGN SYSTEMS INC's Free Cash Flow Margin?
CADENCE DESIGN SYSTEMS INC (CDNS) has a free cash flow margin of 30.0%, generating $1.6 billion in free cash flow over the trailing twelve months. A FCF margin above 20% indicates excellent cash conversion and a high-quality business model.
Q: Is CADENCE DESIGN SYSTEMS INC stock overvalued or undervalued?
CADENCE DESIGN SYSTEMS INC (CDNS) trades at a P/E ratio of 76.2x, which is above the sector median of N/A. The EV/Sales multiple is 15.5x. Free cash flow yield is 1.9%, reflecting growth expectations priced into the stock.
Q: What is CADENCE DESIGN SYSTEMS INC's revenue and earnings growth?
CADENCE DESIGN SYSTEMS INC (CDNS) grew revenue by 14.1% year-over-year. Earnings per share increased by 5.2% compared to the prior year. Solid growth above 10% suggests healthy business momentum.
Q: Is CADENCE DESIGN SYSTEMS INC buying back stock?
CADENCE DESIGN SYSTEMS INC (CDNS) repurchased $925.0 million of stock over the trailing twelve months. This represents a buyback yield of 1.1%.
Q: How does CADENCE DESIGN SYSTEMS INC compare to competitors in Technology?
Compared to other companies in Technology, CADENCE DESIGN SYSTEMS INC (CDNS) shows: ROIC of 16.7% is above the sector median of 5.2% (Top 23%). FCF margin of 30.0% exceeds the sector median of 9.1% (Top 12% of sector). These rankings are based on MetricDuck's analysis of all Technology companies with available SEC filings.
Q: What warning signs should I watch for with CADENCE DESIGN SYSTEMS INC?
Investors in CADENCE DESIGN SYSTEMS INC (CDNS) should monitor these potential warning signs: 1) ROIC has been declining, potentially signaling deteriorating competitive position. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-Q filed 2025-10-29. TTM metrics as of Q4 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
Scope: This analysis covers SEC filing fundamentals — profitability, cash flow, balance sheet, and valuation metrics. For analyst estimates and price targets, consult sell-side research.
This analysis is for informational purposes only and does not constitute investment advice.