Why Cadence Design Systems (CDNS) Dipped More Than Broader Market Today

Cadence Design Systems (CDNS) ended the recent trading session at $284.11, demonstrating a -2.93% change from the preceding day's closing price. The stock's performance was behind the S&P 500's daily loss of 0.58%. At the same time, the Dow lost 1.18%, and the tech-heavy Nasdaq lost 0.32%.

The maker of hardware and software products for validating chip designs's shares have seen a decrease of 11.81% over the last month, not keeping up with the Computer and Technology sector's gain of 0.12% and the S&P 500's loss of 0.36%.

The upcoming earnings release of Cadence Design Systems will be of great interest to investors. In that report, analysts expect Cadence Design Systems to post earnings of $2.04 per share. This would mark year-over-year growth of 5.7%. Meanwhile, the latest consensus estimate predicts the revenue to be $1.61 billion, indicating a 20.23% increase compared to the same quarter of the previous year.

Regarding the entire year, the Zacks Consensus Estimates forecast earnings of $8.12 per share and revenue of $6.31 billion, indicating changes of +13.73% and +19.18%, respectively, compared to the previous year.

Investors should also note any recent changes to analyst estimates for Cadence Design Systems. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the business and profitability.

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. The Zacks Consensus EPS estimate remained stagnant within the past month. Currently, Cadence Design Systems is carrying a Zacks Rank of #3 (Hold).

In terms of valuation, Cadence Design Systems is presently being traded at a Forward P/E ratio of 36.04. For comparison, its industry has an average Forward P/E of 16.56, which means Cadence Design Systems is trading at a premium to the group.

We can also see that CDNS currently has a PEG ratio of 2.47. 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 1.54 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 95, finds itself in the top 39% echelons of all 250+ industries.

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

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

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