Is Cadence Design Systems Inc (CDNS) overvalued?
On Equity Rank's model estimate, CDNS trades 60% above its fair value. Cadence Design Systems Inc (CDNS) last closed at $319.92; the multi-method model fair value is $200.51.
| Price | Model fair value | Price vs model |
|---|---|---|
| $319.92 | $200.51 | 60% above |
What the answer rests on
- 0 of 8 valuation methods put CDNS's value above its price and 8 put it below, so the methods mostly agree.
- To justify today's price, CDNS's free cash flow would need to grow about 21.2% a year for ten years (a reverse discounted cash flow). Over the last three years it actually grew 12.4% a year.
- CDNS trades at 65.5 times its last year's earnings, against a median of 31.1 for 87 profitable Software companies.
- Over the past year the price sat below the model fair value on 0% of trading days. The gap ranged from 31% above to 250% above the model fair value.
Read this before relying on it
The model fair value is an estimate from published financial statements. It is not a forecast of where the price goes, and it can be wrong. Within 10% either side we call it close to fair value: valuation models are not precise enough to read more into a smaller gap. Our own lists have no proven edge over the market yet; the live record shows every result, misses included.
Every valuation method behind CDNS's fair value · What prices assume · Other companies