Cadence Design Systems (CDNS): Evaluating Valuation as Market Optimism and AI Momentum Boost Shares
Cadence Design Systems (CDNS) shares climbed after a key inflation report came in lower than expected. This fueled optimism that the Federal Reserve may pivot on interest rates, a development that often supports tech stocks.
See our latest analysis for Cadence Design Systems.
Cadence Design Systems’ share price has shown solid upward momentum lately, fueled by both favorable macro news and the company’s strong fundamentals. After a quick jump on softer inflation data, the real story is its impressive 1-year total shareholder return of 34.1 percent and a three-year total return topping 127.8 percent. This reflects persistent confidence in its earnings growth and expanding presence in high-growth tech sectors.
If this performance has you wondering what other innovative tech names might be benefiting from the current market backdrop, it’s the perfect moment to discover See the full list for free.
With Cadence’s impressive rally and favorable analyst sentiment, the big question now is whether shares still offer value at current levels, or if the recent run-up means future growth is already priced in.
Most Popular Narrative: 6.9% Undervalued
At $345.10, Cadence Design Systems trades below the most followed narrative’s fair value of $370.84, implying modest upside if expectations are met. This setup increases anticipation for the catalysts powering the narrative below.
Cadence’s strategic investments in AI-driven design and verification tools are expected to drive future revenue growth, as the company reports increasing adoption of its AI-enabled offerings, such as the Cadence Cerebrus AI solution and SimAI, which have shown significant performance improvements for customers.
Read the complete narrative.
The valuation is based on ambitious projections about revenue acceleration and profitability boosts from emerging technology. Curious how much future earnings growth is factored into this view? The full narrative unveils the data behind the price tag and what’s at stake if reality diverges from the model.
Result: Fair Value of $370.84 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, ongoing export restrictions and fluctuations in AI hardware demand could still present challenges to Cadence’s growth story and market expectations in the coming quarters.
Find out about the key risks to this Cadence Design Systems narrative.
Another View: What Do Valuation Ratios Say?
Looking at Cadence Design Systems from a different perspective, its price-to-earnings ratio stands at 92.9x, which is far higher than both the US Software industry average of 33.3x and its peer group’s 66.6x. It also trades well above the fair ratio of 42.5x. This suggests the market is banking on exceptional future growth. Does this premium signal confidence or possible overexuberance?
See what the numbers say about this price — find out in our valuation breakdown.
NasdaqGS:CDNS PE Ratio as at Oct 2025
Build Your Own Cadence Design Systems Narrative
If you want to see the full story from your own perspective, it only takes a few minutes to examine the data and craft your own narrative. Do it your way
A good starting point is our analysis highlighting 1 key reward investors are optimistic about regarding Cadence Design Systems.
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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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