CDNS Down 6.4% in One Day, Should You Buy The Stock Despite Its High Valuation?

We believe there is not much to fear in CDNS stock given its overall Very Strong operating performance and financial condition. Hence, despite its Very High valuation, the stock appears Attractive but Volatile. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $92 Bil in market cap, Cadence Design Systems provides software, hardware, services, and reusable IC design blocks, including functional verification, emulation, prototyping, digital IC design, and power optimization products.

[1] Valuation Looks Very High

This table highlights how CDNS is valued vs broader market. For more details see: CDNS Valuation Ratios

[2] Growth Is Very Strong

• Cadence Design Systems has seen its top line grow at an average rate of 15.8% over the last 3 years
• Its revenues have grown 22% from $4.2 Bil to $5.1 Bil in the last 12 months
• Also, its quarterly revenues grew 20.2% to $1.3 Bil in the most recent quarter from $1.1 Bil a year ago.

This table highlights how CDNS is growing vs broader market. For more details see: CDNS Revenue Comparison

[3] Profitability Appears Very Strong

• CDNS last 12 month operating income was $1.6 Bil representing operating margin of 30.7%
• With cash flow margin of 33.7%, it generated nearly $1.7 Bil in operating cash flow over this period
• For the same period, CDNS generated nearly $1.0 Bil in net income, suggesting net margin of about 19.9%

This table highlights how CDNS profitability vs broader market. For more details see: CDNS Operating Income Comparison

[4] Financial Stability Looks Very Strong

• CDNS Debt was $2.5 Bil at the end of the most recent quarter, while its current Market Cap is $92 Bil. This implies Debt-to-Equity Ratio of 2.7%
• CDNS Cash (including cash equivalents) makes up $2.8 Bil of $9.5 Bil in total Assets. This yields a Cash-to-Assets Ratio of 29.7%

[4] Downturn Resilience Is Moderate

CDNS saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• CDNS stock fell 29.6% from a high of $191.65 on 27 December 2021 to $134.95 on 18 February 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 August 2022
• Since then, the stock increased to a high of $371.03 on 30 July 2025 , and currently trades at $338.53

 
2020 Covid Pandemic

• CDNS stock fell 32.1% from a high of $80.02 on 19 February 2020 to $54.32 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 24 April 2020

 
2008 Global Financial Crisis

• CDNS stock fell 89.2% from a high of $24.22 on 4 June 2007 to $2.61 on 15 December 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 20 May 2016

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