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Cadence Design Systems Inc. Message Board

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  • edabarsteward edabarsteward Dec 30, 2009 10:25 AM Flag

    CDNS could be a bankrupt company

    Just as idiotic is the statement that revenues have to rise 6 times in order to achieve a 6X increase in share price...

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    • edabarsteward,

      i know anything can happen in a casino, but casinomics apart, can you explain how price of a stock would rise 6 times without its revenues or projected revenues rising by a similar amount?

      okay, let me make it simpler for you, would you be willing to pay USD 30 for cadence stock if its earnings continues to remain flat for next 5 years?

      Thanks much for your time and insight

      EDA is DEAD

      • 1 Reply to edaisdead
      • edaisdead,

        As you say in your 2nd paragraph, the price of stock is related to earnings per share (and future growth of earnings per share). Earnings can improve by reducing costs and/or increasing revenues. Many companies over the last year have improved earnings solely based on reducing costs. The question in 2010 is will they be able to increase revenue in order to continue to grow earnings.

        For the sake of argument, if costs are reduced but revenue increases then every $ of increased revenue goes to earnings. Hence why I was pointing out that you don't need a 6X increase in revenue in order to see a 6X increase in stock price (and earnings). This is pretty basic stuff.

        I certainly don't see CDNS going to $30 anytime soon, but $12 within a year or so, depending on the economy - not out of the question.

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