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Cadence Design Systems (CDNS) has caught investors’ attention after a period where the stock was roughly flat over the past month but saw negative movement over the past three months.
Against that backdrop, shares recently closed at US$318.32, with year-to-date and one-year total returns broadly flat, while three- and five-year total returns are at higher levels.
Check out our latest analysis for Cadence Design Systems.
At the current share price of US$318.32, Cadence Design Systems reflects a modest 2.55% year-to-date share price gain, alongside a small decline in one-year total shareholder returns of 0.67%. Its three- and five-year total shareholder returns of 72.04% and 144.13%, respectively, indicate stronger longer-term compounding, suggesting momentum has slowed recently compared to its prior period.
If this kind of mixed short-term momentum has you reassessing your watchlist, now could be a useful time to see what other chip design and software names are among the high-growth tech and AI stocks.
With revenues of about $5.2 billion, net income of more than $1.0 billion and a flattening of recent returns, the key question now is whether Cadence is quietly undervalued or whether the market is already pricing in its future growth potential?
With Cadence Design Systems last closing at $318.32 at a narrative fair value of around $384.20, the most followed storyline sees meaningful upside potential built into long-term cash generation.
The growing partnership with major industry players such as NVIDIA and Intel, including initiatives such as 3D IC and data center digital twins, positions Cadence for future competitive advantages and new revenue streams.
Read the full story.
Would you like to see what kind of revenue path and margin profile is needed for that valuation? The story relies on compound growth, richer profitability and a premium earnings multiple well above the broad software group. Curious which assumptions really determine the fair value here?
Result: Fair value of $384.20 (UNDERVALUE)
Read the story completely and understand what is behind the predictions.
There are still real swing factors here, though, from geopolitical tensions around China to possible stumbles in key AI partnerships that could quickly test this optimistic setup.
Read more about the key risks of this Cadence Design Systems story.
That 17.1% “undervalued” story sits uneasily next to Cadence’s current price-to-earnings ratio of 81.7x, which is well above the US software industry at 30.8x and comparable at 54.5x, and more than double the reasonable ratio of 39x. With such a gap, is there a real risk that expectations are already too high?
See what the numbers say about this price – find out in our valuation overview.
If that view doesn’t quite fit your own view of the numbers, you can dive into the data yourself and shape a new story in just a few minutes, do it your way.
A good starting point is our analysis that highlights two key rewards that investors are bullish on regarding Cadence Design Systems.
If Cadence is no longer the only story worth your attention, now is a good time to broaden your search and try new ideas.
This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.
Companies discussed in this article include CDNS.
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