Cadence Design Systems Inc (NASDAQ: CDNS)

Sector: Technology Industry: Software - Application CIK: 0000813672
Market Cap 88.81 Bn
P/B 17.08
P/E 83.71
P/S 17.04
ROIC (Qtr) 14.32
Div Yield % 0.00
Rev 1y % (Qtr) 10.15
Total Debt (Qtr) 2.48 Bn
Debt/Equity (Qtr) 0.48

About

Price action

Investment thesis

Bull case

  • Strong operating cash flow of 1.62B provides robust 0.65x coverage of total debt 2.48B, indicating excellent debt servicing capability and financial flexibility.
  • Operating cash flow of 1.62B provides exceptional 13.82x coverage of interest expenses 117.01M, showing strong debt service capability.
  • Strong tangible asset base of 6.28B provides 2.53x coverage of total debt 2.48B, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 1.48B exceeds capital expenditure of 138.03M by 10.71x, indicating strong organic growth funding capability.
  • Tangible assets of 6.28B provide exceptional 6.94x coverage of deferred revenue 905.34M, showing strong service capability backing.

Bear case

  • Operating cash flow of 1.62B barely covers its investment activities of (411.73M), with a coverage ratio of -3.93, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (411.73M) provide weak support for R&D spending of 1.70B, which is -0.24x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 2.75B provide limited coverage of acquisition spending of (241.44M), which is -11.40x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 755.26M relative to inventory of 286.19M (2.64 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • The company's operating cash flow of 1.62B shows concerning coverage of stock compensation expenses of 448.52M, with a 3.60 ratio indicating potential earnings quality issues.

Peer comparison

Companies in the Software - Application
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 SAP Sap Se 288.31 Bn 34.60 6.72 10.73 Bn
2 CRM Salesforce, Inc. 248.32 Bn 34.38 6.16 11.14 Bn
3 SHOP Shopify Inc. 212.27 Bn 119.19 19.85 1.12 Bn
4 INTU Intuit Inc. 180.73 Bn 43.89 9.30 6.78 Bn
5 UBER Uber Technologies, Inc 178.38 Bn 10.72 3.60 12.19 Bn
6 NOW ServiceNow, Inc. 146.98 Bn 84.91 11.60 2.40 Bn
7 ADBE Adobe Inc. 144.48 Bn 20.77 6.23 6.64 Bn
8 ADP Automatic Data Processing Inc 108.20 Bn 26.16 5.18 9.77 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 9.22 2.65
EV to Cash from Ops. EV/CFO 54.72 13.37
EV to Debt EV to Debt 35.69 57.69
EV to EBIT EV/EBIT 55.90 19.12
EV to EBITDA EV/EBITDA 51.91 15.00
EV to Free Cash Flow [EV/FCF] EV/FCF 59.83 14.69
EV to Market Cap EV to Market Cap 1.00 -92.28
EV to Revenue EV/Rev 16.97 4.60
Price to Book Value [P/B] P/B 17.08 4.26
Price to Earnings [P/E] P/E 83.71 -136.90
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 -3.95
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 4.25
Dividend per Basic Share Div per Share (Qtr) 0.00 0.15
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 2.52
Interest Coverage Int. cover (Qtr) 13.53 -52.32
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 0.73 -259.78
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -1.18 9,763.58
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 1.61
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 5.83 -263.15
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 20.61 56.46
EBIT Growth (1y) % EBIT 1y % (Qtr) 15.00 -225.15
EBT Growth (1y) % EBT 1y % (Qtr) 10.94 -86.10
EPS Growth (1y) % EPS 1y % (Qtr) 1.82 123.84
FCF Growth (1y) % FCF 1y % (Qtr) 55.28 -36.82
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 16.66 95.08
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.54 0.58
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.02
Cash Ratio Cash Ratio (Qtr) 1.96 3.75
Current Ratio Curr Ratio (Qtr) 3.05 8.16
Debt to Equity Ratio Debt/Equity (Qtr) 0.48 0.17
Interest Cover Ratio Int Coverage (Qtr) 13.53 -52.32
Times Interest Earned Times Interest Earned (Qtr) 13.53 -52.32
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 34.60 -100.06
EBIT Margin % EBIT Margin % (Qtr) 30.36 -164.24
EBT Margin % EBT Margin % (Qtr) 28.12 -116.94
Gross Margin % Gross Margin % (Qtr) 85.50 58.20
Net Profit Margin % Net Margin % (Qtr) 20.40 -121.65