Is Cadence Design Systems's (NASDAQ:CDNS) Share Price Gain Of 288% Well Earned?

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Cadence Design Systems, Inc. (NASDAQ:CDNS) share price has soared 288% in the last half decade. Most would be very happy with that. Also pleasing for shareholders was the 38% gain in the last three months. This could be related to the recent financial results, released recently - you can catch up on the most recent data by reading our company report.

Check out our latest analysis for Cadence Design Systems

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Cadence Design Systems achieved compound earnings per share (EPS) growth of 16% per year. This EPS growth is slower than the share price growth of 31% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 48.02.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Cadence Design Systems has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Cadence Design Systems will grow revenue in the future.

A Different Perspective

It's good to see that Cadence Design Systems has rewarded shareholders with a total shareholder return of 56% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 31% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. If you would like to research Cadence Design Systems in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this freelist of companies we expect will grow earnings.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.