Amidst today's fast-paced and highly competitive business environment, it is crucial for investors and industry enthusiasts to conduct comprehensive company evaluations. In this article, we will delve into an extensive industry comparison, evaluating Cadence Design Sys CDNS in comparison to its major competitors within the Software industry. By analyzing critical financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company's performance in the industry.
Cadence Design Sys Background
Cadence Design Systems is a provider of electronic design automation software, intellectual property, and system design and analysis products. EDA software automates the chip design process, enhancing design accuracy, productivity, and complexity in a full-flow end-to-end solution. Cadence offers a portfolio of design IP, as well as system design and analysis products, which enable system-level analysis and verification solutions. Cadence's comprehensive portfolio is benefiting from a mutual convergence of semiconductor companies moving up-stack toward systems-like companies, and systems companies moving down-stack toward in-house semiconductor design. The resulting expansion in EDA customers, alongside secular digitalization of various end markets, benefits EDA vendors like Cadence.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Cadence Design Systems Inc | 78.41 | 24.05 | 19.15 | 8.45% | $0.35 | $0.91 | 13.36% |
| Adobe Inc | 55.52 | 17.82 | 15.05 | 9.17% | $1.99 | $4.31 | 10.31% |
| Salesforce Inc | 143.97 | 3.86 | 6.90 | 2.19% | $2.42 | $6.49 | 11.44% |
| SAP SE | 78.77 | 3.93 | 5.28 | 3.01% | $2.37 | $5.64 | 3.57% |
| Intuit Inc | 63.22 | 9.51 | 11.07 | 1.41% | $0.53 | $2.22 | 14.67% |
| Synopsys Inc | 82.95 | 14.10 | 15.53 | 5.7% | $0.38 | $1.18 | 19.2% |
| Workday Inc | 1097.88 | 10.46 | 9.90 | 1.76% | $0.23 | $1.42 | 16.67% |
| Roper Technologies Inc | 45.53 | 3.30 | 9.40 | 2.06% | $0.68 | $1.1 | 15.78% |
| Autodesk Inc | 50.44 | 30.85 | 8.66 | 17.93% | $0.37 | $1.29 | 5.13% |
| Palantir Technologies Inc | 283.43 | 13.53 | 20.85 | 2.33% | $0.09 | $0.45 | 16.8% |
| Ansys Inc | 54.04 | 5.19 | 12.09 | 1.12% | $0.11 | $0.39 | -2.9% |
| Splunk Inc | 218.26 | 122.48 | 6.28 | 121.15% | $0.14 | $0.86 | 14.8% |
| Zoom Video Communications Inc | 89.41 | 2.79 | 4.61 | 1.96% | $0.2 | $0.87 | 3.16% |
| PTC Inc | 75.48 | 6.93 | 8.85 | 1.73% | $0.16 | $0.43 | 7.62% |
| Tyler Technologies Inc | 110.08 | 6.01 | 9.03 | 1.67% | $0.11 | $0.23 | 4.54% |
| Dynatrace Inc | 92.12 | 8.73 | 12.16 | 2.04% | $0.05 | $0.29 | 25.91% |
| Bentley Systems Inc | 95.69 | 22.52 | 14.50 | 7.94% | $0.1 | $0.24 | 14.27% |
| Manhattan Associates Inc | 84.38 | 65.52 | 15.77 | 25.97% | $0.05 | $0.13 | 20.36% |
| AppLovin Corp | 139.39 | 11.96 | 4.75 | 8.25% | $0.31 | $0.6 | 21.2% |
| NICE Ltd | 39.31 | 3.81 | 5.54 | 2.89% | $0.16 | $0.41 | 8.4% |
| Average | 152.62 | 19.12 | 10.33 | 11.59% | $0.55 | $1.5 | 12.15% |
When analyzing Cadence Design Sys, the following trends become evident:
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The Price to Earnings ratio of 78.41 is 0.51x lower than the industry average, indicating potential undervaluation for the stock.
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With a Price to Book ratio of 24.05, which is 1.26x the industry average, Cadence Design Sys might be considered overvalued in terms of its book value, as it is trading at a higher multiple compared to its industry peers.
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With a relatively high Price to Sales ratio of 19.15, which is 1.85x the industry average, the stock might be considered overvalued based on sales performance.
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The Return on Equity (ROE) of 8.45% is 3.14% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.
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The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $350 Million is 0.64x below the industry average, suggesting potential lower profitability or financial challenges.
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Compared to its industry, the company has lower gross profit of $910 Million, which indicates 0.61x below the industry average, potentially indicating lower revenue after accounting for production costs.
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The company's revenue growth of 13.36% exceeds the industry average of 12.15%, indicating strong sales performance and market outperformance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio indicates the proportion of debt and equity used by a company to finance its assets and operations.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
By considering the Debt-to-Equity ratio, Cadence Design Sys can be compared to its top 4 peers, leading to the following observations:
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Compared to its top 4 peers, Cadence Design Sys has a stronger financial position indicated by its lower debt-to-equity ratio of 0.21.
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This suggests that the company relies less on debt financing and has a more favorable balance between debt and equity, which can be seen as a positive attribute by investors.
Key Takeaways
The valuation analysis for Cadence Design Sys in the software industry reveals that its PE ratio is low compared to its peers, indicating potential undervaluation. The PB ratio is high, suggesting that the market values the company's assets more than its earnings. The PS ratio is also high, indicating that investors are willing to pay a premium for the company's sales. On the other hand, the company's low ROE, EBITDA, gross profit, and revenue growth suggest that it may be facing challenges in generating profits and expanding its business compared to its industry peers.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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