Cadence Design Systems' (NASDAQ:CDNS) investors will be pleased with their splendid 275% return over the last five years
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of Cadence Design Systems, Inc. (NASDAQ:CDNS) stock is up an impressive 275% over the last five years. In the last week the share price is up 1.6%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Cadence Design Systems
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, Cadence Design Systems achieved compound earnings per share (EPS) growth of 25% per year. This EPS growth is reasonably close to the 30% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Cadence Design Systems has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
It's nice to see that Cadence Design Systems shareholders have received a total shareholder return of 16% over the last year. However, that falls short of the 30% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Cadence Design Systems better, we need to consider many other factors. For example, we've discovered 1 warning sign for Cadence Design Systems that you should be aware of before investing here.
But note: Cadence Design Systems may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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