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Bull of the Day: Cadence Design (CDNS)

David Bartosiak

With the stock market pushing equities up near all-time highs, it may feel like every stock is going to rocket higher. It’s times like this when investors should actually be more cautious. Stocks which have strong earnings trends are the ones most likely to continue higher as the market breaks out. This way, investors have the peace of mind in knowing that they are buying a strong underlying business, not just a stock on the move.

One way to identify stocks like this is by leaning on the Zacks Rank. Zacks Rank #1 (Strong Buy) stocks like today’s Bull of the Day have strong underlying earnings trends. The trend is very strong here in Cadence Design Systems (CDNS). Cadence Design Systems, Inc. provides software, hardware, services, and reusable integrated circuit (IC) design blocks worldwide. The company offers functional verification services, including emulation and prototyping hardware. Its functional verification offering consists of JasperGold, a formal verification platform; Xcelium, a parallel simulation platform; Palladium Z1, an enterprise emulation platform; and Protium S1 field-programmable gate array prototyping platform.

Cadence is coming off a strong quarterly report with EPS coming in at 54 cents versus expectations calling for 50 cents. Revenues were strong as well, with the company reporting $577 million in sales versus expectations calling for $560 million. Earnings estimates have been increasing for the current quarter, next quarter, current year and next year. Over the last ninety days, next year’s Zacks Consensus Estimate has gone up from $2.10 to $2.21. The current year consensus has shot up from $1.95 to $2.05.

Cadence Design Systems, Inc. Price and Consensus

Cadence Design Systems, Inc. Price and Consensus | Cadence Design Systems, Inc. Quote

This strong trend has helped underpin a rally in the stock off the late 2019 lows. When the market bottomed out on Christmas Eve last year, Cadence was trading down near $40. Since then, the stock has rallied sharply, up over 60% off the lows.

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