Measuring Cadence Design Systems Inc’s (NASDAQ:CDNS) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess CDNS’s recent performance announced on 29 September 2018 and compare these figures to its historical trend and industry movements.
Check out our latest analysis for Cadence Design Systems
Did CDNS perform worse than its track record and industry?
CDNS’s trailing twelve-month earnings (from 29 September 2018) of US$233m has declined by -9.3% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 2.5%, indicating the rate at which CDNS is growing has slowed down. Why could this be happening? Let’s examine what’s occurring with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Cadence Design Systems has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 11% exceeds the US Software industry of 4.9%, indicating Cadence Design Systems has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Cadence Design Systems’s debt level, has increased over the past 3 years from 15% to 22%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 46% to 27% over the past 5 years.
What does this mean?
Cadence Design Systems’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. I suggest you continue to research Cadence Design Systems to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CDNS’s future growth? Take a look at our free research report of analyst consensus for CDNS’s outlook.
- Financial Health: Are CDNS’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 29 September 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.