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Cadence Design Systems (CDNS) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
Moody's (MCO) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Cadence Design Systems (CDNS) closed the most recent trading day at $63.97, moving -1.13% from the previous trading session. This change lagged the S&P 500's daily loss of 0.23%. At the same time, the Dow lost 0.01%, and the tech-heavy Nasdaq lost 0.05%.

Prior to today's trading, shares of the maker of hardware and software products for validating chip designs had gained 5.65% over the past month. This has outpaced the Computer and Technology sector's gain of 4.13% and the S&P 500's gain of 3.16% in that time.

Investors will be hoping for strength from CDNS as it approaches its next earnings release, which is expected to be April 22, 2019. In that report, analysts expect CDNS to post earnings of $0.50 per share. This would mark year-over-year growth of 25%. Our most recent consensus estimate is calling for quarterly revenue of $567.11 million, up 9.63% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $2.05 per share and revenue of $2.28 billion, which would represent changes of +9.63% and +6.74%, respectively, from the prior year.

Investors should also note any recent changes to analyst estimates for CDNS. These revisions help to show the ever-changing nature of near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. CDNS is currently sporting a Zacks Rank of #1 (Strong Buy).

Valuation is also important, so investors should note that CDNS has a Forward P/E ratio of 31.64 right now. For comparison, its industry has an average Forward P/E of 31.36, which means CDNS is trading at a premium to the group.

It is also worth noting that CDNS currently has a PEG ratio of 2.64. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Computer - Software industry currently had an average PEG ratio of 2.19 as of yesterday's close.

The Computer - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 12, which puts it in the top 5% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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