Cadence Design Systems (CDNS) Outpaces Stock Gains: What You Need to Know

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IIn the last trading session, Cadence Design Systems (CDNS) closed at $157, marking a +1.93% move from the previous day. The stock topped the S&P 500 daily gain of 1.92%. Meanwhile, the Dow Jones gained 2.15% and the tech-heavy Nasdaq gained 0.12%.

Prior to today’s trading, shares of the maker of hardware and software products for chip design validation had gained 9.17% in the past month. This outpaced the IT & Technology sector’s gain of 2.35% and the S&P 500’s gain of 1.54% during this period.

Investors are hoping for strength from Cadence Design Systems ahead of its next earnings release, which is expected on July 25, 2022. In the report, analysts expect Cadence Design Systems to post a profit of 0 $.97 per share. This would mark a year-over-year growth of 12.79%. Meanwhile, our latest consensus estimate calls for revenue of $837.05 million, up 14.93% from the prior year quarter.

Zacks consensus estimates for the full year for CDNS call for earnings of $3.94 per share and revenue of $3.4 billion. These results would represent year-over-year variations of +19.76% and +13.81%, respectively.

Investors might also notice recent changes in analyst estimates for Cadence Design Systems. Recent revisions tend to reflect the latest short-term trading trends. Therefore, we can interpret positive estimate revisions as a good sign for the company’s business outlook.

Our research shows that these estimate changes are directly correlated to short-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model that takes into account these estimation changes and provides an actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven track record of outperformance, with #1 stocks returning an average of +25% per year since 1988. In the past 30 days, our consensus EPS projection has remained stagnant. Cadence Design Systems currently holds a Zacks rank of #3 (Hold).

In terms of valuation, Cadence Design Systems is currently trading at a Forward P/E ratio of 39.12. This represents a premium to its industry average Forward P/E of 24.18.

It should also be noted that CDNS currently has a PEG ratio of 2.28. The PEG ratio is similar to the widely used P/E ratio, but this measure also takes into account the company’s expected earnings growth rate. Computer and software stocks maintain an average PEG ratio of 2.08 based on yesterday’s closing prices.

The Computing – Software industry is part of the Computing and Technology sector. This industry currently has a Zacks Industry Rank of 136, which places it in the bottom 47% of all 250+ industries.

The Zacks Industry Ranking assesses the strength of our industry groups by measuring the average Zacks Ranking of individual stocks within the groups. Our research shows that the top 50% of industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and more, at Zacks.com.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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