Peer Comparison: ASML, Broadcom, and Constellation Software
In April, Fitch affirmed $Cadence Design(CDNS)$ as having a 'A-' rating and stable outlook.
Fitch expects solid performance for Cadence, with recent acquisitions increasing their TAM, barriers to entry and switching costs.
Fitch expects Cadence will maintain moderate growth in periods of semiconductor down-cycle.
Here's an interesting section on Cadence's peers:
Fitch views $ASML Holding NV(ASML)$ $Constellation Software, Inc.(CNSWY)$ $Broadcom(AVGO)$ as Cadence's close peers.
ASML operates within the semiconductor supply chain with a similarly strong market position. lts revenue scale is larger than Cadence butwith lower EBITDA margins. Like Cadence, Broadcom addresses the technology product development environment across a wide range of industry verticals through its acquisition of CA.Inc.,Symantec, and $VMware(VMW)$ .
Broadcom has greater scale and margins than Cadence but holds a lower rating due to its higher leverage and acquisitions appetite. Constellation Software's revenue scale is comparable to Cadence's, with a mid-teens FCF margin.
Cadence compares favorably with these software peersin the 'BBB' rating category. Fitch considers Synopsys a close peer with a similar business profleand market exposure. Cadence excels in analog systems, while Synopsys leads in digital systems.Synopsys's LTM EBlTDA and FCF margins are slightly below Cadence's.
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