Cadence Design Systems (CDNS) Falls More Steeply Than Broader Market: What Investors Need to Know

Cadence Design Systems (CDNS) ended the recent trading session at $313.04, demonstrating a -7.6% change from the preceding day's closing price. This change lagged the S&P 500's 0.71% loss on the day. Elsewhere, the Dow saw a downswing of 0.79%, while the tech-heavy Nasdaq depreciated by 1.03%.

The maker of hardware and software products for validating chip designs's shares have seen an increase of 0.78% over the last month, not keeping up with the Computer and Technology sector's gain of 4.69% and the S&P 500's gain of 2.72%.

Market participants will be closely following the financial results of Cadence Design Systems in its upcoming release. The company is expected to report EPS of $2.04, up 5.7% from the prior-year quarter. In the meantime, our current consensus estimate forecasts the revenue to be $1.61 billion, indicating a 20.23% growth compared to the corresponding quarter of the prior year.

CDNS's full-year Zacks Consensus Estimates are calling for earnings of $8.12 per share and revenue of $6.31 billion. These results would represent year-over-year changes of +13.73% and +19.18%, respectively.

Investors should also pay attention to any latest changes in analyst estimates for Cadence Design Systems. These revisions typically reflect the latest short-term business trends, which can change frequently. Consequently, upward revisions in estimates express analysts' positivity towards the business operations and its ability to generate profits.

Our research demonstrates that these adjustments in estimates directly associate with imminent stock price performance. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, spanning from #1 (Strong Buy) to #5 (Strong Sell), boasts an impressive track record of outperformance, audited externally, with #1 ranked stocks yielding an average annual return of +25% since 1988. Over the last 30 days, the Zacks Consensus EPS estimate has moved 0.02% lower. As of now, Cadence Design Systems holds a Zacks Rank of #3 (Hold).

In terms of valuation, Cadence Design Systems is currently trading at a Forward P/E ratio of 41.72. This represents a premium compared to its industry average Forward P/E of 17.95.

Meanwhile, CDNS's PEG ratio is currently 2.86. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The average PEG ratio for the Computer - Software industry stood at 1.63 at the close of the market yesterday.

The Computer - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 85, putting it in the top 35% 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.

Keep in mind to rely on Zacks.com to watch all these stock-impacting metrics, and more, in the succeeding trading sessions.

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

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