Revenue minus cost of goods sold. Graham's ≥40% threshold identifies businesses with durable pricing power. Note: software and financial companies naturally exceed this; retailers and manufacturers rarely reach it due to their cost structures.
Operating Margin31.1%
Profit after operating costs before interest and taxes. A consistent ≥15% operating margin signals a business with real competitive advantages. Capital-intensive industries (airlines, auto, commodities) rarely hit this threshold due to their structural cost base — compare within industry for context.
Net Income Margin20.9%
Bottom-line profit as a percentage of revenue. The ≥20% target reflects Buffett's preference for highly profitable businesses. Financial engineering (buybacks, tax optimisation) can inflate this temporarily — look for consistency across multiple years rather than a single strong result.
Financial Health
A
Years to Pay Off Debt2.4 yrs
Total Debt ÷ Net Income. Lower = stronger balance sheet. Important caveat: utilities, telecoms, REITs, and infrastructure companies carry large structural debt by design — their bond-like cash flows service it comfortably at ratios that would alarm Graham. Compare within sector.
Working Capital vs Long-Term Debt$554M
Working Capital minus Long-Term Debt. Negative results are common and expected in capital-return-focused businesses like Apple, Domino's, and McDonald's — where aggressive buybacks and dividends intentionally reduce book equity. This does not indicate financial distress in high-FCF businesses.
Working Capital$3.0B
Current Assets minus Current Liabilities. Negative working capital can be a deliberate efficiency strategy in businesses that collect cash before paying suppliers (retailers, fast food franchises, subscription businesses). Assess alongside free cash flow generation for full context.
Valuation
F
Margin of Safety0.0%
How far below the Graham Number the stock trades. Graham required a 33% discount as a buffer against analytical error. However, the Graham Number itself assumes 1960s-era P/E and P/B norms — for modern asset-light businesses it often understates true intrinsic value, making 0% MoS appear misleadingly bad.
Price-to-Book19.52x
Market price vs book value per share. Rarely below 1.5x for quality businesses today. Intangible assets (brand, software, patents) don't appear on the balance sheet under accounting rules, making P/B artificially high for asset-light companies like software and consumer brands.
Cash Flow
A
Free Cash Flow$1.6B
Operating cash flow minus capital expenditures. Buffett's most important metric — cash a business actually generates for its owners after maintaining and growing its asset base. Consistently positive FCF is one of the strongest indicators of a durable, well-run business regardless of accounting profits.
CapEx % of Net Income12.8%
Capital expenditure as a share of net income. Low CapEx signals a capital-light business that doesn't need heavy reinvestment to sustain earnings — Buffett's ideal. High CapEx is structurally necessary in manufacturing, airlines, telecoms, and semiconductors. For these industries, a high reading reflects the business model, not poor management.
Owner Earnings$1.5B
Net Income + Depreciation & Amortisation − Capital Expenditures. Buffett's preferred measure of a company's true annual earning power — what could theoretically be distributed to owners without impairing the business. More reliable than reported EPS because it accounts for the capital cost of maintaining the business.
About Cadence Design Systems, Inc.
Cadence Design Systems, Inc. develops computational, AI-driven software, hardware, and silicon intellectual property products and solutions. The company offers functional verification services, such as Jasper, a formal verification platform; Xcelium, a parallel logic simulation platform; Verisium, a generative AI solution; Palladium, an enterprise emulation platform; and Protium, a prototyping platform for chip verification, as well as digital IC design and sign off products, including In novus platform; and custom IC design and simulation product include Virtuoso, a platform to design and verify analog. It also provides Xcelium logic simulator and other front-end verification and virtual prototyping technologies; controllers and physical interfaces; PCI Express, universal accelerator and compute express links, and multiple memory interfaces; and Ten Silica, a digital signal processor. In addition, the company's design IP portfolio includes serializer/deserializer, peripheral component interconnect, USB, and other standard protocols; and Secure-IC, a solution for embedded security IP. Additionally, it provides System Design and Analysis (SD&A) platform, a solution that enables end-to-end system-level design and verification across chips, packages, PCBs, and electronic systems; Allegro X and Orca X platforms for PCB and advanced packaging; Sigrity X for signal and power integrity; AIR for RF design; Fidelity for computational fluid dynamics; Celsius for thermal and airflow analysis; Clarity 3D solver for electromagnetic and power electronics analysis and simulation; Integrity 3D-IC solution for 3D-IC and multi-chiplet designs; the Optimality Intelligent System Explorer, Reality digital twin, and Millennium enterprise multiphasic platforms; Allegro system design platform; and molecular modeling and simulation solutions and services. The company has a strategic collaboration with NVIDIA. The company was incorporated in 1987 and is headquartered in San Jose, California.
Cadence Design Systems, Inc. develops computational, AI-driven software, hardware, and silicon intellectual property products and solutions. The company offers functional verification services, such as Jasper, a formal verification platform; Xcelium, a parallel logic simulation platform; Verisium, a generative AI solution; Palladium, an enterprise emulation platform; and Protium, a prototyping platform for chip verification, as well as digital IC design and sign off products, including In novus platform; and custom IC design and simulation product include Virtuoso, a platform to design and verify analog. It also provides Xcelium logic simulator and other front-end verification and virtual prototyping technologies; controllers and physical interfaces; PCI Express, universal accelerator and compute express links, and multiple memory interfaces; and Ten Silica, a digital signal processor. In addition, the company's design IP portfolio includes serializer/deserializer, peripheral component interconnect, USB, and other standard protocols; and Secure-IC, a solution for embedded security IP. Additionally, it provides System Design and Analysis (SD&A) platform, a solution that enables end-to-end system-level design and verification across chips, packages, PCBs, and electronic systems; Allegro X and Orca X platforms for PCB and advanced packaging; Sigrity X for signal and power integrity; AIR for RF design; Fidelity for computational fluid dynamics; Celsius for thermal and airflow analysis; Clarity 3D solver for electromagnetic and power electronics analysis and simulation; Integrity 3D-IC solution for 3D-IC and multi-chiplet designs; the Optimality Intelligent System Explorer, Reality digital twin, and Millennium enterprise multiphasic platforms; Allegro system design platform; and molecular modeling and simulation solutions and services. The company has a strategic collaboration with NVIDIA. The company was incorporated in 1987 and is headquartered in San Jose, California.
Metric Explanations
What each dimension measures and where the thresholds come from.
Gross Profit Margin
Revenue minus cost of goods sold. Graham's ≥40% threshold identifies businesses with durable pricing power. Note: software and financial companies naturally exceed this; retailers and manufacturers rarely reach it due to their cost structures.
Operating Margin
Profit after operating costs before interest and taxes. A consistent ≥15% operating margin signals a business with real competitive advantages. Capital-intensive industries (airlines, auto, commodities) rarely hit this threshold due to their structural cost base — compare within industry for context.
Net Income Margin
Bottom-line profit as a percentage of revenue. The ≥20% target reflects Buffett's preference for highly profitable businesses. Financial engineering (buybacks, tax optimisation) can inflate this temporarily — look for consistency across multiple years rather than a single strong result.
Years to Pay Off Debt
Total Debt ÷ Net Income. Lower = stronger balance sheet. Important caveat: utilities, telecoms, REITs, and infrastructure companies carry large structural debt by design — their bond-like cash flows service it comfortably at ratios that would alarm Graham. Compare within sector.
Working Capital vs Long-Term Debt
Working Capital minus Long-Term Debt. Negative results are common and expected in capital-return-focused businesses like Apple, Domino's, and McDonald's — where aggressive buybacks and dividends intentionally reduce book equity. This does not indicate financial distress in high-FCF businesses.
Working Capital
Current Assets minus Current Liabilities. Negative working capital can be a deliberate efficiency strategy in businesses that collect cash before paying suppliers (retailers, fast food franchises, subscription businesses). Assess alongside free cash flow generation for full context.
Margin of Safety
How far below the Graham Number the stock trades. Graham required a 33% discount as a buffer against analytical error. However, the Graham Number itself assumes 1960s-era P/E and P/B norms — for modern asset-light businesses it often understates true intrinsic value, making 0% MoS appear misleadingly bad.
Price-to-Book
Market price vs book value per share. Rarely below 1.5x for quality businesses today. Intangible assets (brand, software, patents) don't appear on the balance sheet under accounting rules, making P/B artificially high for asset-light companies like software and consumer brands.
Free Cash Flow
Operating cash flow minus capital expenditures. Buffett's most important metric — cash a business actually generates for its owners after maintaining and growing its asset base. Consistently positive FCF is one of the strongest indicators of a durable, well-run business regardless of accounting profits.
CapEx % of Net Income
Capital expenditure as a share of net income. Low CapEx signals a capital-light business that doesn't need heavy reinvestment to sustain earnings — Buffett's ideal. High CapEx is structurally necessary in manufacturing, airlines, telecoms, and semiconductors. For these industries, a high reading reflects the business model, not poor management.
Owner Earnings
Net Income + Depreciation & Amortisation − Capital Expenditures. Buffett's preferred measure of a company's true annual earning power — what could theoretically be distributed to owners without impairing the business. More reliable than reported EPS because it accounts for the capital cost of maintaining the business.
Mr. Market is currently offering Cadence Design Systems, Inc. at $387.39.
The business passes only 3 of 7 of Graham's defensive criteria — well below his required standard.
At $387.39, the stock trades at a 810% premium to its Graham Number of $42.58. Graham would consider this price speculative.
There is no margin of safety at the current price. Graham would advise patience and waiting for a better entry point.
Negative NCAV — liabilities exceed current assets. Common in capital-return businesses (buybacks, debt-funded dividends) and capital-intensive industries. Not automatically a warning sign..
Conclusion: By Graham's standards, this stock is speculative at its current price. The intelligent investor would look elsewhere or wait.
Showing Key Metrics
Income Highlights
Metric
2025
2024
2023
2022
Gross Profit %
86.4%▲
86.0%▼
89.4%▼
89.6%
Operating Margin %
31.1%▲
29.8%▼
30.9%▲
30.1%
Net Income %
20.9%▼
22.7%▼
25.5%▲
23.8%
Diluted EPS
4.06▲
3.85▲
3.82▲
3.09
Balance Sheet Highlights
Metric
2025
2024
2023
2022
2021
Total Assets
$10.2B
$9.0B
$5.7B
$5.1B
N/A
Total Debt
$2.6B▲
$2.6B▲
$764M▼
$887M•
N/A
Working Capital
$3.0B▲
$2.6B▲
$385M▲
$359M•
N/A
Years to Pay Debt
2.36
2.45
0.73
1.05
N/A
Cash Flow Highlights
Metric
2025
2024
2023
2022
2021
Free Cash Flow
$1.6B▲
$1.1B▼
$1.2B▲
$1.1B•
N/A
Owner Earnings
$1.5B
$1.4B
$1.3B
$1.1B
N/A
CapEx % of Net Income
12.8%
13.5%
9.8%
14.6%
N/A
Income Statement
2025
2024
2023
2022
Tax Effect Of Unusual Items
-30,003
6,755
5,438
-2,760
Tax Rate For Calcs
0
0
0
0
Normalized EBITDA
1,983,139
1,639,147
1,434,904
1,218,410
Total Unusual Items
-110,711
27,686
28,950
-14,683
Total Unusual Items Excluding Goodwill
-110,711
27,686
28,950
-14,683
Net Income From Continuing Operation Net Minority Interest
1,108,888
1,055,484
1,041,144
848,952
Reconciled Depreciation
233,844
195,015
145,743
135,430
Reconciled Cost Of Revenue
528,342
482,862
307,460
254,663
EBITDA
1,872,428
1,666,833
1,463,854
1,203,727
EBIT
1,638,584
1,471,818
1,318,111
1,068,297
Net Interest Income
-14,957
-13,515
-6,548
-12,835
Interest Expense
116,541
75,999
36,185
22,934
Interest Income
101,584
62,484
29,637
10,099
Normalized Income
1,189,596
1,034,553
1,017,632
860,875
Net Income From Continuing And Discontinued Operation
1,108,888
1,055,484
1,041,144
848,952
Total Expenses
3,646,978
3,258,414
2,827,748
2,487,977
Total Operating Income As Reported
1,492,042
1,350,763
1,251,225
1,073,686
Diluted Average Shares
273,312
273,833
272,748
275,011
Basic Average Shares
271,333
271,212
269,381
271,198
Diluted EPS
0
0
0
0
Basic EPS
0
0
0
0
Diluted NI Availto Com Stockholders
1,108,888
1,055,484
1,041,144
848,952
Net Income Common Stockholders
1,108,888
1,055,484
1,041,144
848,952
Net Income
1,108,888
1,055,484
1,041,144
848,952
Net Income Including Noncontrolling Interests
1,108,888
1,055,484
1,041,144
848,952
Net Income Continuous Operations
1,108,888
1,055,484
1,041,144
848,952
Tax Provision
413,155
340,335
240,782
196,411
Pretax Income
1,522,043
1,395,819
1,281,926
1,045,363
Other Income Expense
-112,781
26,484
26,236
-15,543
Other Non Operating Income Expenses
-2,070
-1,202
-2,714
-860
Special Income Charges
-146,239
-32,087
-11,013
-55
Gain On Sale Of Ppe
11,500
0
0
Other Special Charges
128,545
8,322
Restructuring And Mergern Acquisition
29,194
23,765
11,013
55
Gain On Sale Of Security
35,528
59,773
39,963
-14,628
Net Non Operating Interest Income Expense
-14,957
-13,515
-6,548
-12,835
Interest Expense Non Operating
116,541
75,999
36,185
22,934
Interest Income Non Operating
101,584
62,484
29,637
10,099
Operating Income
1,649,781
1,382,850
1,262,238
1,073,741
Operating Expense
2,924,729
2,610,912
2,392,707
2,116,354
Depreciation Amortization Depletion Income Statement
39,937
30,375
18,162
18,470
Depreciation And Amortization In Income Statement
39,937
30,375
18,162
18,470
Amortization
39,937
30,375
18,162
18,470
Amortization Of Intangibles Income Statement
39,937
30,375
18,162
18,470
Research And Development
1,768,772
1,549,093
1,441,796
1,251,544
Selling General And Administration
1,116,020
1,031,444
932,749
846,340
Selling And Marketing Expense
802,633
757,483
690,319
604,224
General And Administrative Expense
313,387
273,961
242,430
242,116
Other Gand A
313,387
273,961
242,430
242,116
Gross Profit
4,574,510
3,993,762
3,654,945
3,190,095
Cost Of Revenue
722,249
647,502
435,041
371,623
Total Revenue
5,296,759
4,641,264
4,089,986
3,561,718
Operating Revenue
5,296,759
4,641,264
4,089,986
3,561,718
Balance Sheet
2025
2024
2023
2022
2021
Treasury Shares Number
59,101
57,049
57,453
56,485
Ordinary Shares Number
271,799
273,851
271,706
272,675
Share Issued
330,900
330,900
329,159
329,160
Total Debt
2,616,439
2,585,076
764,414
887,415
Tangible Book Value
2,006,815
1,700,173
1,531,583
1,016,228
Invested Capital
7,954,331
7,149,761
4,053,327
3,493,191
Working Capital
3,034,382
2,645,974
385,350
359,071
Net Tangible Assets
2,006,815
1,700,173
1,531,583
1,016,228
Capital Lease Obligations
136,289
108,893
115,358
139,337
Common Stock Equity
5,474,181
4,673,578
3,404,271
2,745,113
Total Capitalization
7,954,331
7,149,761
3,704,042
3,393,191
Total Equity Gross Minority Interest
5,474,181
4,673,578
3,404,271
2,745,113
Stockholders Equity
5,474,181
4,673,578
3,404,271
2,745,113
Gains Losses Not Affecting Retained Earnings
-1,805
-190,448
-94,754
-91,637
Other Equity Adjustments
-1,805
-190,448
-94,754
-91,637
Treasury Stock
6,344,213
5,309,579
4,604,323
3,824,163
Retained Earnings
7,100,756
5,991,868
4,936,384
3,895,240
Capital Stock
4,719,443
4,181,737
3,166,964
2,765,673
Common Stock
4,719,443
4,181,737
3,166,964
2,765,673
Total Liabilities Net Minority Interest
4,678,967
4,300,904
2,265,220
2,391,958
Total Non Current Liabilities Net Minority Interest
3,043,676
2,930,799
674,353
1,044,262
Non Current Accrued Expenses
271,240
230,555
160,293
165,323
Non Current Deferred Liabilities
155,997
115,168
98,931
91,524
Non Current Deferred Revenue
155,997
115,168
98,931
91,524
Long Term Debt And Capital Lease Obligation
2,616,439
2,585,076
415,129
787,415
Long Term Capital Lease Obligation
136,289
108,893
115,358
139,337
Long Term Debt
2,480,150
2,476,183
299,771
648,078
Current Liabilities
1,635,291
1,370,105
1,590,867
1,347,696
Current Deferred Liabilities
778,435
737,413
665,024
745,106
Current Deferred Revenue
778,435
737,413
665,024
745,106
Current Debt And Capital Lease Obligation
349,285
100,000
Current Debt
349,285
100,000
Other Current Borrowings
349,285
Line Of Credit
0
100,000
0
Payables And Accrued Expenses
856,856
632,692
576,558
502,590
Current Accrued Expenses
763,365
627,137
485,364
455,477
Payables
93,491
5,555
91,194
47,113
Accounts Payable
93,491
5,555
91,194
47,113
Total Assets
10,153,148
8,974,482
5,669,491
5,137,071
Total Non Current Assets
5,483,475
4,958,403
3,693,274
3,430,304
Other Non Current Assets
337,891
274,465
248,254
185,901
Non Current Deferred Assets
917,733
982,057
880,001
853,691
Non Current Deferred Taxes Assets
917,733
982,057
880,001
853,691
Investments And Advances
67,517
124,086
138,321
119,997
Investmentin Financial Assets
138,321
119,997
127,501
Long Term Equity Investment
138,321
119,997
Goodwill And Other Intangible Assets
3,467,366
2,973,405
1,872,688
1,728,885
Other Intangible Assets
718,223
594,734
336,843
354,617
Goodwill
2,749,143
2,378,671
1,535,845
1,374,268
Net PPE
692,968
604,390
554,010
541,830
Accumulated Depreciation
-1,021,505
-916,732
-836,782
-776,937
Gross PPE
1,714,473
1,521,122
1,390,792
1,318,767
Leases
298,417
245,669
211,854
176,413
Construction In Progress
3,193
14,879
17,937
21,670
Other Properties
175,964
146,190
150,797
170,379
Machinery Furniture Equipment
1,041,889
918,916
821,681
761,745
Buildings And Improvements
137,597
137,781
131,882
131,949
Land And Improvements
57,413
57,687
56,641
56,611
Current Assets
4,669,673
4,016,079
1,976,217
1,706,767
Other Current Assets
265,659
293,253
166,821
135,739
Prepaid Assets
293,253
166,821
69,498
85,320
Inventory
303,545
257,711
181,661
128,005
Finished Goods
43,393
13,251
18,907
14,023
Work In Process
14,665
1,216
0
Raw Materials
245,487
243,244
162,754
113,982
Receivables
944,939
680,460
489,224
486,710
Receivables Adjustments Allowances
-3,888
-5,808
-4,553
-2,290
Other Receivables
455,993
293,251
193,963
174,334
Accounts Receivable
492,834
393,017
299,814
314,666
Cash Cash Equivalents And Short Term Investments
3,155,530
2,784,655
1,138,511
886,815
Other Short Term Investments
154,213
140,625
130,359
4,490
Cash And Cash Equivalents
3,001,317
2,644,030
1,008,152
882,325
Cash Equivalents
548,373
658,474
Cash Financial
333,952
430,466
Cash Flow
2025
2024
2023
2022
2021
Free Cash Flow
1,586,910
1,118,009
1,246,673
1,117,679
Repurchase Of Capital Stock
-1,094,876
-787,763
-836,530
-1,161,955
Repayment Of Debt
0
-1,350,000
-150,000
-485,000
Issuance Of Debt
0
3,196,595
50,000
885,000
Issuance Of Capital Stock
145,901
204,237
132,957
105,331
Capital Expenditure
-141,871
-142,542
-102,503
-124,215
Interest Paid Supplemental Data
111,951
43,219
34,934
21,122
Income Tax Paid Supplemental Data
509,979
253,700
233,235
146,424
End Cash Position
3,001,317
2,644,030
1,008,152
882,325
Beginning Cash Position
2,644,030
1,008,152
882,325
1,088,940
Effect Of Exchange Rate Changes
38,004
-26,796
-7,527
-52,826
Changes In Cash
319,283
1,662,674
133,354
-153,789
Financing Cash Flow
-948,975
1,239,241
-803,573
-657,049
Cash Flow From Continuing Financing Activities
-948,975
1,239,241
-803,573
-657,049
Net Other Financing Charges
-23,828
-425
-1,285
Net Common Stock Issuance
-948,975
-583,526
-703,573
-1,056,624
Common Stock Payments
-1,094,876
-787,763
-836,530
-1,161,955
Common Stock Issuance
145,901
204,237
132,957
105,331
Net Issuance Payments Of Debt
0
1,846,595
-100,000
400,000
Net Short Term Debt Issuance
-100,000
100,000
0
Short Term Debt Payments
-150,000
-485,000
0
Short Term Debt Issuance
50,000
585,000
0
Net Long Term Debt Issuance
0
1,846,595
-100,000
400,000
Long Term Debt Payments
0
-1,350,000
-150,000
-485,000
Long Term Debt Issuance
0
3,196,595
50,000
885,000
Investing Cash Flow
-460,523
-837,118
-412,249
-738,634
Cash Flow From Continuing Investing Activities
-460,523
-837,118
-412,249
-738,634
Net Investment Purchase And Sale
99,386
42,998
-111,395
-634
Sale Of Investment
140,281
47,980
64,775
366
Purchase Of Investment
-40,895
-4,982
-176,170
-1,000
Net Business Purchase And Sale
-429,538
-737,574
-198,351
-613,785
Purchase Of Business
-429,538
-737,574
-198,351
-613,785
Net Intangibles Purchase And Sale
11,500
0
-166
-1,000
Sale Of Intangibles
11,500
0
0
Purchase Of Intangibles
0
0
-166
-1,000
Net PPE Purchase And Sale
-141,871
-142,542
-102,337
-123,215
Purchase Of PPE
-141,871
-142,542
-102,337
-123,215
Operating Cash Flow
1,728,781
1,260,551
1,349,176
1,241,894
Cash Flow From Continuing Operating Activities
1,728,781
1,260,551
1,349,176
1,241,894
Change In Working Capital
-73,251
-208,975
-98,778
87,545
Change In Other Working Capital
69,411
66,478
-21,583
131,462
Change In Other Current Liabilities
13,551
23,592
1,802
43,542
Change In Other Current Assets
-18,569
11,866
-45,784
-933
Change In Payables And Accrued Expense
184,897
33,676
5,415
113,945
Change In Prepaid Assets
43,382
-81,529
39,015
-38,927
Change In Inventory
-91,029
-82,771
-65,895
-23,073
Change In Receivables
-274,894
-180,287
-11,748
-138,471
Other Non Cash Items
7,166
6,138
6,570
1,505
Stock Based Compensation
455,175
391,219
325,611
270,439
Provisionand Write Offof Assets
2,078
3,325
204
525
Deferred Tax
66,048
-128,737
-36,512
-107,606
Deferred Income Tax
66,048
-128,737
-36,512
-107,606
Depreciation Amortization Depletion
233,844
195,015
145,743
135,430
Depreciation And Amortization
233,844
195,015
145,743
135,430
Depreciation
233,844
195,015
145,743
135,430
Operating Gains Losses
-69,089
-49,593
-34,602
5,425
Gain Loss On Investment Securities
-69,089
-49,593
-34,602
5,425
Net Income From Continuing Operations
1,108,888
1,055,484
1,041,144
848,952
3/7
Graham Score
Speculative Investor
Fails most of Graham's safety criteria. Treat with caution.
Graham's Fair Value
$42.58
Margin of Safety
0%
Market Cap / Net Assets
19.5x
Net Assets: $5.5B
Warren's Owner Earnings
$1.5B
Latest fiscal year
Graham's 7 Criteria
Defensive Investor Checklist
3/7 — Speculative Investor
✅
Adequate Size
Graham required companies large enough to withstand economic downturns. This threshold ($1.5B) is inflation-adjusted from Graham's original $100M — virtually all S&P 500 companies pass this today.
$5.3B
vs > $1.5B revenue
✅
Strong Financial Condition
Current assets must be at least twice current liabilities. Note: highly profitable companies (Apple, Domino's) often run negative or low working capital deliberately — they collect cash fast and stretch payables. A failing score here is not always a warning sign.
2.86x
vs Current Ratio > 2.0x
✅
Earnings Stability
Graham required uninterrupted positive earnings. Any loss year is a red flag for defensive investors. Growth companies and cyclicals may show occasional losses during investment cycles or downturns without being fundamentally unsound.
No loss years (4 yrs data)
vs No negative EPS years
❌
Dividend Record
Graham valued dividends as evidence of financial discipline and shareholder alignment. Many excellent modern businesses (Alphabet, Amazon, Berkshire Hathaway) pay no dividend, preferring to reinvest cash at high rates of return. Failing this criterion does not indicate a poor business — it may indicate a high-growth one.
No dividend
vs Uninterrupted dividends
❌
Earnings Growth
EPS grew from $3.09 to $4.06 over 3 years. Graham's 33% threshold was set over a 10-year period. Measured over fewer years (as here), the bar is proportionally lower. Share buybacks can also inflate EPS growth without reflecting underlying business improvement.
+31.4% EPS growth
vs > 33% EPS growth
❌
Moderate P/E Ratio
Graham's 15x P/E threshold was calibrated to 1960s market averages when interest rates were higher. Today's lower rate environment structurally supports higher multiples — the S&P 500 long-run average P/E is now closer to 20–25x. A stock trading at 20x is not automatically speculative in the modern context.
89.9x
vs P/E ≤ 15.0x
❌
Moderate Price-to-Book
Graham's 1.5x P/B threshold made sense when most company value was tangible. Today, intangible assets — brand, software, patents, network effects — rarely appear on the balance sheet. A high P/B in tech, pharma, or consumer brands often reflects intangible value, not overvaluation. P/FCF or EV/EBITDA are more reliable for asset-light businesses.
19.52x P/B (P/E×P/B: 1754.4)
vs P/B ≤ 1.5x | P/E × P/B ≤ 22.5
Graham's 7 Criteria — Explained
What each criterion measures and why it matters.
✅ Adequate Size — $5.3Bvs > $1.5B revenue
Graham required companies large enough to withstand economic downturns. This threshold ($1.5B) is inflation-adjusted from Graham's original $100M — virtually all S&P 500 companies pass this today.
"The minimum size of an enterprise should be not less than $100 million of annual sales."
✅ Strong Financial Condition — 2.86xvs Current Ratio > 2.0x
Current assets must be at least twice current liabilities. Note: highly profitable companies (Apple, Domino's) often run negative or low working capital deliberately — they collect cash fast and stretch payables. A failing score here is not always a warning sign.
"For industrial companies, current assets should be at least twice current liabilities."
✅ Earnings Stability — No loss years (4 yrs data)vs No negative EPS years
Graham required uninterrupted positive earnings. Any loss year is a red flag for defensive investors. Growth companies and cyclicals may show occasional losses during investment cycles or downturns without being fundamentally unsound.
"The company should have shown no deficit in the past ten years."
❌ Dividend Record — No dividendvs Uninterrupted dividends
Graham valued dividends as evidence of financial discipline and shareholder alignment. Many excellent modern businesses (Alphabet, Amazon, Berkshire Hathaway) pay no dividend, preferring to reinvest cash at high rates of return. Failing this criterion does not indicate a poor business — it may indicate a high-growth one.
"Some current dividend payments — for at least the past 20 years."
EPS grew from $3.09 to $4.06 over 3 years. Graham's 33% threshold was set over a 10-year period. Measured over fewer years (as here), the bar is proportionally lower. Share buybacks can also inflate EPS growth without reflecting underlying business improvement.
"A minimum increase of at least one-third in per-share earnings over ten years."
❌ Moderate P/E Ratio — 89.9xvs P/E ≤ 15.0x
Graham's 15x P/E threshold was calibrated to 1960s market averages when interest rates were higher. Today's lower rate environment structurally supports higher multiples — the S&P 500 long-run average P/E is now closer to 20–25x. A stock trading at 20x is not automatically speculative in the modern context.
"The price-earnings ratio should be no more than 15 times average earnings."
Graham's 1.5x P/B threshold made sense when most company value was tangible. Today, intangible assets — brand, software, patents, network effects — rarely appear on the balance sheet. A high P/B in tech, pharma, or consumer brands often reflects intangible value, not overvaluation. P/FCF or EV/EBITDA are more reliable for asset-light businesses.
"The price should not be more than 1½ times book value. P/E × P/B ≤ 22.5."
These metrics estimate what Cadence Design Systems, Inc. is worth based on fundamentals — independent of what the market prices it at.
Graham's Fair Value and NCAV are conservative floors.
EPV assumes zero growth. These are reference points, not price targets.
Net Current Asset Value
$-0.03
Negative NCAV — liabilities exceed current assets. Common in capital-return businesses (buybacks, debt-funded dividends) and capital-intensive industries. Not automatically a warning sign.
"Buy at two-thirds of net current assets." — Graham
Earnings Power Value
$66.46
Per share, no-growth floor. Compare to current price.
ROIC — Return on Invested Capital
15.3%
Return on Invested Capital — Buffett's preferred measure for asset-light businesses. ROIC > 15% consistently signals a durable competitive advantage (moat). More meaningful than P/B for software, pharma, and consumer brand companies where most value is intangible and off-balance-sheet.
Cash Flow Analysis
Metric
2025
2024
2023
2022
2021
Capital Expenditure % of Net Income
12.8%
13.5%
9.8%
14.6%
N/A
Repurchase of Capital Stock
-$1.1B
-$788M
-$837M
-$1.2B
N/A
Free Cash Flow
$1.6B▲
$1.1B▼
$1.2B▲
$1.1B•
N/A•
Warren's Owner Earnings
$1.5B
$1.4B
$1.3B
$1.1B
N/A
Peers & Industry
No auto-detected peers for Software - Application. You can manually compare CDNS against any stock using the Compare tool.
"The management of a business is its most important single factor — more important than market position, patents, or financial structure."
— Benjamin Graham
Capital Allocation & Alignment
Insider Ownership
0.29%
Low — management has little skin in the game
Return on Equity (ROE)
20.3%
Excellent — management generates strong returns on equity
Return on Assets (ROA)
10.9%
Strong — management uses assets efficiently
Share Buybacks (Latest Year)
$1.1B
Management is returning capital to shareholders via buybacks
Debt Trend YoY
+1.2% YoY
Debt is roughly stable
Leadership Team
Anirudh Devgan Ph.
CEO, President & Director
Age 55
Pay: $2,271,043
0.205% of net income
John Wall
Senior VP & CFO
Age 54
Pay: $1,383,058
0.125% of net income
Paul Scannell
Senior Vice President of Global Customer Success Team
Age 59
Pay: $1,208,527
0.109% of net income
Ariel Sella
Co-Founder
Richard Gu
Vice President of Investor Relations
Top Institutional Holders
Institution
% Owned
Shares
Blackrock Inc.
9.23%
25,452,593
Vanguard Capital Management LLC
6.46%
17,813,174
State Street Corporation
4.53%
12,492,023
FMR, LLC
3.32%
9,153,206
Geode Capital Management, LLC
2.86%
7,875,471
Vanguard Portfolio Management LLC
2.55%
7,031,933
JPMORGAN CHASE & CO
2.37%
6,545,190
Jennison Associates LLC
2.09%
5,761,905
Risk Analysis
Beta (Market Risk)
1.15
Moderate volatility — moves slightly more than market
Short Interest
1.8% of float
Low short interest — market is not heavily bearish
Debt-to-Equity
0.47x
Conservative balance sheet — low financial risk
Current Ratio
1.47x
Adequate liquidity
52-Week Price Range
Low: $262.75Current: $387.39High: $416.69
Currently at 81% of 52-week range
Cadence Design Systems, Inc. (CDNS) fundamental analysis — Overall grade B based on profitability, financial health, valuation and cash flow. Graham's
Fair Value: $42.58. Margin of safety: 0%. Gross profit margin: 86.4%. Operating margin: 31.1%. Net margin: 20.9%. Market cap: $106.8B. Sector: Technology. Industry: Software - Application. Analysis powered by 360investing — free fundamental stock analysis based on Benjamin Graham and Warren Buffett
principles.
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