CDNS (Cadence Design Systems Inc) vs S&P 500 Comparison

CDNS

S&P 500

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CDNS

S&P 500

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CDNS

S&P 500

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Compare the stock's returns with its benchmark index and competitors. Gain insights into its relative performance over time.

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S&P 500

CDNS

SAP

CRM

PLTR

ADBE

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Cadence Design Systems Inc
Glance View

Economic Moat

Narrow

Market Cap

70.5B USD

Industry

Technology

In the fiercely competitive realm of electronic design automation (EDA), Cadence Design Systems Inc. stands as a titan, orchestrating the seamless symphony of hardware and software development. Founded in 1988 through the merger of SDA Systems and ECAD, Inc., Cadence has steadily built a reputation for providing comprehensive design solutions that enable the creation of complex and innovative semiconductor products. With its headquarters nestled in San Jose, California, the company leverages its extensive suite of tools to aid engineers in the intricate art of designing integrated circuits and systems on chips. These tools streamline design processes and improve productivity, enabling clients to bring cutting-edge consumer electronics, telecommunications equipment, and other technology products to market more swiftly and efficiently. Central to Cadence’s business model is not just software licensing but also its innovative subscription and services approach, which fosters enduring relationships with its clientele. Cadence's revenue streams predominantly flow from software, particularly through selling licenses for its cutting-edge design tools in perpetual, time-based, and subscription formats. In addition, the company provides specialized support and service offerings that enhance its software solutions, further embedding its tools into clients' workflows. By offering thoughtful and personalized support, Cadence ensures its tools evolve in tandem with each customer's needs. This unique combination of technological prowess and adaptable business strategy has allowed Cadence Design Systems to carve a powerful niche in the highly competitive world of electronic systems design.

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CDNS Intrinsic Value

What is Intrinsic Value?

Economic Moat is a concept popularized by Warren Buffett to describe a company's durable competitive advantage. It represents the 'moat' that protects a company from competitors and helps it sustain profitability over the long term. Our analysis of the past 10 years showed that companies with a wide economic moat significantly outperformed the market, delivering +645% returns compared to +189% for the S&P 500.

Our research into Economic Moat performance spans the past 10 years and focuses on companies with a wide economic moat. For this analysis, we calculated the average stock price returns of these companies, comparing them to the performance of the S&P 500 index over the same period.

The results were compelling: wide moat stocks achieved a remarkable +645% average return, compared to +188% for the broader market. This difference highlights the long-term benefits of investing in businesses that can maintain their market position and pricing power over time.

Note: This research does not account for survivorship bias. Past performance is not indicative of future results.

Determining whether a company has an economic moat requires both a deep dive into financial metrics and a qualitative assessment of its competitive position. Our analysts conduct a rigorous evaluation that focuses on identifying structural advantages that enable a company to sustain profitability and defend its market share over the long term.

The process begins with an analysis of a company’s historical financial performance. We assess how consistently the company has generated returns above its cost of capital and whether those returns have been stable or improving. However, financial performance alone doesn’t reveal the full picture. To understand the sources of these advantages, we evaluate five key drivers of economic moats:

Network Effect: We analyze whether the value of a company’s product or service grows as its user base expands. Platforms like payment systems or marketplaces benefit from this self-reinforcing.

Switching Costs: We assess whether customers face significant costs or disruptions when switching to a competitor’s product or service. High switching costs create customer stickiness and provide pricing power.

Intangible Assets: Strong brands, patents, and regulatory licenses can protect a company’s market position by creating barriers for competitors or enabling premium pricing. For example, a well-recognized consumer brand may command higher customer loyalty and margins.

Efficient scale: Occurs when a market is optimally served by one or a few players, making it unprofitable for new entrants to compete. This typically happens in industries with high fixed costs or geographic constraints, such as utilities or pipelines.

Cost Advantage: Companies with structural cost advantages can produce goods or services at a lower cost than their competitors, enabling them to offer competitive pricing or maintain higher margins. These advantages often arise from economies of scale, superior supply chain management, or proprietary technology. Firms like Walmart leverage their massive scale to negotiate better terms with suppliers, allowing them to undercut competitors on price.

By examining these factors in combination with a company’s financial performance and market positioning, we classify each company into one of three categories:

This rigorous evaluation ensures that our moat ratings are both comprehensive and reliable, giving investors the tools they need to make well-informed, long-term decisions.

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CDNS

vs

S&P 500

Stocks Performance
CDNS vs S&P 500

Performance Gap
CDNS vs S&P 500

Performance By Year
CDNS vs S&P 500

Competitors Performance
Cadence Design Systems Inc vs Peers

Cadence Design Systems Inc
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CDNS vs S&P 500

Stocks Performance CDNS vs S&P 500

Performance Gap CDNS vs S&P 500

Performance By Year CDNS vs S&P 500

Competitors Performance Cadence Design Systems Inc vs Peers

Cadence Design Systems Inc Glance View

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CDNS

vs

S&P 500

Stocks Performance
CDNS vs S&P 500

Performance Gap
CDNS vs S&P 500

Performance By Year
CDNS vs S&P 500

Competitors Performance
Cadence Design Systems Inc vs Peers

Cadence Design Systems Inc
Glance View