Introduction
Cadence Design Systerms, Inc. is a leading pioneer of electronic system design software and intellectual property (“IP”), building upon more than 35 years of computational software expertise.
It is a global company that provides computational software, special-purpose computational hardware, IP and services to multiple vertical sectors including automotive, AI, aerospace and defense, high-performance and mobile computing, hyperscalers, wireless communications, IIoT and medical equipment.
Asset structure analysis
Cadence’s total assets reached $5.7 billion and $5.1 billion on December 31, 2023 and 2022, respectively.
Total assets increased by 11.8% in 2023， compared to 2022.
Cadence’s goodwill was $1.5 billion and $1.38 billion in 2023 and 2022，respectively.
This means that Cadence has made a lot of acquisitions in the past.
Cadence disclosed in its financial report that it had conducted four mergers and acquisitions in the most recent year.
Liquidity and Solvency Analysis
In 2023, total liabilities were $2.27 billion, accounting for 40% of total assets.
In 2023, current assets were $1.98 billion and current liabilities were $1.6 billion, resulting in a current ratio of 1.2:1.
In reality, the current ratio is understated.
Deferred revenue from Cadence’s current liabilities was $665 million in 2023.
After deducting deferred revenue from current liabilities, the current ratio is 2:1.
The net cash provided by operating activities was $1.35 billion, $1.24 billion, and $1.1 billion in 2023 and 2022, respectively.
The debt ratio is very low, coupled with the company’s excellent cash flow position, the balance sheet is very healthy.
Profitability Analysis
Cadence’s revenues reached $4.09 billion, $3.56 billion, and $3 billion in 2023, 2022, and 2021, respectively.
Revenues in 2023 increased by 14.9% year-on-year.
Revenues in 2022 increased by 18.7% year-on-year.
Cadence’s net profit was $1.04 billion, $850 million, and $700 million in 2023, 2022, and 2021, respectively.
Cadence’s net profit margin was 25%, 24%, and 23% in 2023, 2022, and 2021 ,respectively.
Net profit increased by 22% year-on-year in 2023.
Net profit in 2022 increased by 21% year-on-year.
Cadence’s profitability is relatively stable.
Cash flow analysis
Net cash provided by operating activities reached $1.35 billion, $1.24 billion, and $1.1 billion in 2023, 2022, and 2021, respectively.
Every year, the net cash provided by operating activities exceeds the amount of net profit, which shows that the quality of profits is relatively high.
The purchase of property, plant and equipment was $100 million, $120 million and $65 million in 2023, 2022 and 2021, respectively.
Free cash flow was $1.25 billion, $1.12 billion, and $1.035 billion in 2023, 2022, and 2021, respectively.
Stock repurchases were $700 million, $1.05 billion, and $600 million in 2023, 2022, and 2021, respectively.
Cadence returned shareholders by buying back shares rather than paying dividends.
Summary
The debt ratio is relatively low and the balance sheet is rather healthy.
Profitability is relatively strong.
Cash flow is very good.
Cadence returned shareholders by buying back shares rather than paying dividends.
We estimate that Cadence’s annual net profit is around $1 billion. Based on a price-to-earnings ratio of 20 times, $20 billion is a reasonable price.
Disclaimer: The content is for reference only and does not constitute investment advice.