Here's a quick analysis of $CDNS
Here's a quick analysis of $Cadence Design(CDNS)$
1. Return on capital has been consistently above 20% since 2017.
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2. FCF per share growth has been fairly predictable and exponential.
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3. Expense margins have gradually been coming down. The OPEX margin is now below 60%. The CAPEX margin is consistently very low (under 5%). The R&D margin is consistently around 40% of revenue.
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4. Cadence has a strong balance sheet. Long-term debt is about 5% of the balance sheet, and interest on that debt is only 3% of operating income.
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5. Cadence has been slowly buying back stock since 2016.
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6. Cadence is a prolific user of stock-based compensation. Currently 33% of OCF is paid out as SBC.
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7. Cadence sees fairly consistent and high top to bottom line growth. Over the last 3 years, share price growth has been in line with revenue growth and FCF growth. However, on a 5 and 10 year time frame share price growth has been much higher than fundamentals, suggesting a re-rating.
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8. Since 2011, Cadence's FCF yield has come down quite significantly. Since 2020 it has sat between 1.5% and 2%.
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What are your views on Cadence Design Systems?
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