Cadence Design Systems (CDNS) Beats Stock Market Upswing: What Investors Need to Know

In the latest trading session, Cadence Design Systems (CDNS) closed at $394.45, marking a +2.47% move from the previous day. This change outpaced the S&P 500's 1.65% gain on the day. Meanwhile, the Dow experienced a rise of 0.92%, and the technology-dominated Nasdaq saw an increase of 3.07%.

Heading into today, shares of the maker of hardware and software products for validating chip designs had gained 10.86% over the past month, outpacing the Computer and Technology sector's gain of 0.33% and the S&P 500's gain of 0.48%.

Analysts and investors alike will be keeping a close eye on the performance of Cadence Design Systems in its upcoming earnings disclosure. The company is expected to report EPS of $2.05, up 24.24% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $1.58 billion, up 23.58% from the prior-year quarter.

CDNS's full-year Zacks Consensus Estimates are calling for earnings of $7.94 per share and revenue of $6.2 billion. These results would represent year-over-year changes of +11.2% and +17.11%, respectively.

It is also important to note the recent changes to analyst estimates for Cadence Design Systems. Recent revisions tend to reflect the latest near-term business trends. Hence, positive alterations in estimates signify analyst optimism regarding the business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To exploit this, we've formed the Zacks Rank, a quantitative model that includes these estimate changes and presents a viable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. Cadence Design Systems is holding a Zacks Rank of #3 (Hold) right now.

Digging into valuation, Cadence Design Systems currently has a Forward P/E ratio of 48.5. This represents a premium compared to its industry average Forward P/E of 14.24.

One should further note that CDNS currently holds a PEG ratio of 3.58. The PEG ratio is akin to the commonly utilized P/E ratio, but this measure also incorporates the company's anticipated earnings growth rate. The average PEG ratio for the Computer - Software industry stood at 1.32 at the close of the market yesterday.

The Computer - Software industry is part of the Computer and Technology sector. This industry, currently bearing a Zacks Industry Rank of 152, finds itself in the bottom 38% echelons of all 250+ industries.

The Zacks Industry Rank assesses the vigor of our specific industry groups by computing the average Zacks Rank of the individual stocks incorporated in the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Remember to apply Zacks.com to follow these and more stock-moving metrics during the upcoming trading sessions.

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This article originally published on Zacks Investment Research (zacks.com).

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