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 Margin29.3%
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 Margin22.8%
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
D
Years to Pay Off Debt9.2 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-$1.5B
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$1.0B
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-Book16.28x
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$307M
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 Income14.5%
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$469M
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 0 of 6 of Graham's defensive criteria — well below his required standard.
At $387.39, the stock trades at a 1410% premium to its Graham Number of $25.66. 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
Q1 2026
Q4 2025
Gross Profit %
85.4%▼
86.9%
Operating Margin %
29.3%▼
32.3%
Net Income %
22.8%▼
27.0%
Diluted EPS
1.23▼
1.42
Balance Sheet Highlights
Metric
Q1 2026
Q4 2025
Q4 2024
Total Assets
$12.1B
$10.2B
N/A
Total Debt
$3.1B▲
$2.6B•
N/A
Working Capital
$1.0B▼
$3.0B•
N/A
Years to Pay Debt
9.19
6.74
N/A
Cash Flow Highlights
Metric
Q1 2026
Q4 2025
Q4 2024
Free Cash Flow
$307M▼
$512M•
N/A
Owner Earnings
$469M
$498M
N/A
CapEx % of Net Income
14.5%
10.6%
N/A
Income Statement
2026
2025
Tax Effect Of Unusual Items
2,303
7,110
Tax Rate For Calcs
0
0
Normalized EBITDA
533,425
557,839
Total Unusual Items
10,663
33,435
Total Unusual Items Excluding Goodwill
10,663
33,435
Net Income From Continuing Operation Net Minority Interest
335,660
388,136
Reconciled Depreciation
84,372
68,873
Reconciled Cost Of Revenue
150,373
131,431
EBITDA
544,088
591,274
EBIT
459,716
522,401
Net Interest Income
-13,348
-4,683
Interest Expense
31,613
29,440
Interest Income
18,265
24,757
Normalized Income
327,300
361,811
Net Income From Continuing And Discontinued Operation
335,660
388,136
Total Expenses
1,042,884
974,889
Total Operating Income As Reported
431,329
463,335
Diluted Average Shares
273,725
272,932
Basic Average Shares
272,061
270,924
Diluted EPS
0
0
Basic EPS
0
0
Diluted NI Availto Com Stockholders
335,660
388,136
Net Income Common Stockholders
335,660
388,136
Net Income
335,660
388,136
Net Income Including Noncontrolling Interests
335,660
388,136
Net Income Continuous Operations
335,660
388,136
Tax Provision
92,443
104,825
Pretax Income
428,103
492,961
Other Income Expense
10,127
32,447
Other Non Operating Income Expenses
-536
-988
Special Income Charges
5
-1,862
Gain On Sale Of Ppe
0
0
Restructuring And Mergern Acquisition
-5
1,862
Gain On Sale Of Security
10,658
35,297
Net Non Operating Interest Income Expense
-13,348
-4,683
Interest Expense Non Operating
31,613
29,440
Interest Income Non Operating
18,265
24,757
Operating Income
431,336
465,225
Operating Expense
828,349
786,163
Depreciation Amortization Depletion Income Statement
20,210
11,578
Depreciation And Amortization In Income Statement
20,210
11,578
Amortization
20,210
11,578
Amortization Of Intangibles Income Statement
20,210
11,578
Research And Development
508,437
464,582
Selling General And Administration
299,702
310,003
Selling And Marketing Expense
211,485
206,778
General And Administrative Expense
88,217
103,225
Other Gand A
88,217
103,225
Gross Profit
1,259,685
1,251,388
Cost Of Revenue
214,535
188,726
Total Revenue
1,474,220
1,440,114
Operating Revenue
1,474,220
1,440,114
Balance Sheet
2026
2025
2024
Treasury Shares Number
59,101
57,049
Ordinary Shares Number
275,816
271,799
Share Issued
275,816
330,900
Net Debt
1,499,502
Total Debt
3,083,354
2,616,439
Tangible Book Value
-301,380
2,006,815
Invested Capital
9,467,633
7,954,331
Working Capital
1,017,892
3,034,382
Net Tangible Assets
-301,380
2,006,815
Capital Lease Obligations
177,184
136,289
108,893
Common Stock Equity
6,561,463
5,474,181
Total Capitalization
9,042,633
7,954,331
Total Equity Gross Minority Interest
6,561,463
5,474,181
Stockholders Equity
6,561,463
5,474,181
Gains Losses Not Affecting Retained Earnings
-40,090
-1,805
Other Equity Adjustments
-40,090
-1,805
Treasury Stock
6,535,792
6,344,213
Retained Earnings
7,436,416
7,100,756
Capital Stock
5,700,929
4,719,443
Common Stock
5,700,929
4,719,443
Total Liabilities Net Minority Interest
5,536,891
4,678,967
Total Non Current Liabilities Net Minority Interest
3,374,383
3,043,676
Other Non Current Liabilities
Non Current Accrued Expenses
217,980
271,240
230,555
Non Current Deferred Liabilities
498,049
155,997
Non Current Deferred Revenue
146,574
155,997
Non Current Deferred Taxes Liabilities
351,475
Long Term Debt And Capital Lease Obligation
2,658,354
2,616,439
Long Term Capital Lease Obligation
177,184
136,289
108,893
Long Term Debt
2,481,170
2,480,150
Current Liabilities
2,162,508
1,635,291
Current Deferred Liabilities
873,598
778,435
Current Deferred Revenue
873,598
778,435
Current Debt And Capital Lease Obligation
425,000
Current Debt
425,000
Other Current Borrowings
Line Of Credit
425,000
Payables And Accrued Expenses
863,910
856,856
Current Accrued Expenses
540,797
763,365
627,137
Payables
323,113
93,491
5,555
Other Payable
Total Tax Payable
234,946
Income Tax Payable
234,946
Accounts Payable
88,167
93,491
5,555
Total Assets
12,098,354
10,153,148
Total Non Current Assets
8,917,954
5,483,475
Other Non Current Assets
674,999
337,891
Non Current Deferred Assets
843,209
917,733
Non Current Deferred Taxes Assets
843,209
917,733
Investments And Advances
67,517
124,086
Goodwill And Other Intangible Assets
6,862,843
3,467,366
Other Intangible Assets
1,933,262
718,223
Goodwill
4,929,581
2,749,143
Net PPE
536,903
692,968
Accumulated Depreciation
-1,021,505
-916,732
Gross PPE
1,714,473
1,521,122
Leases
298,417
245,669
Construction In Progress
3,193
14,879
Other Properties
175,964
146,190
Machinery Furniture Equipment
1,041,889
918,916
Buildings And Improvements
137,597
137,781
Land And Improvements
57,413
57,687
Current Assets
3,180,400
4,669,673
Other Current Assets
421,967
265,659
Prepaid Assets
293,253
Inventory
317,951
303,545
Finished Goods
50,391
43,393
Work In Process
12,319
14,665
Raw Materials
255,241
245,487
Receivables
1,033,814
944,939
Receivables Adjustments Allowances
-3,632
-3,888
Other Receivables
521,173
455,993
Accounts Receivable
516,273
492,834
Cash Cash Equivalents And Short Term Investments
1,406,668
3,155,530
Other Short Term Investments
154,213
140,625
Cash And Cash Equivalents
1,406,668
3,001,317
Cash Flow
2026
2025
2024
Free Cash Flow
306,962
512,454
Repurchase Of Capital Stock
-323,094
-221,721
Repayment Of Debt
0
-350,000
Issuance Of Debt
425,000
0
Issuance Of Capital Stock
72,610
7,832
Capital Expenditure
-48,820
-41,041
Interest Paid Supplemental Data
57,232
240
Income Tax Paid Supplemental Data
34,659
213,862
End Cash Position
1,406,668
3,001,317
Beginning Cash Position
3,001,317
2,753,246
Effect Of Exchange Rate Changes
-12,972
-2,726
Changes In Cash
-1,581,677
250,797
Financing Cash Flow
174,516
-213,889
Cash Flow From Continuing Financing Activities
174,516
-213,889
Net Other Financing Charges
-1,159
Net Common Stock Issuance
-250,484
-213,889
Common Stock Payments
-323,094
-221,721
Common Stock Issuance
72,610
7,832
Net Issuance Payments Of Debt
425,000
0
Net Long Term Debt Issuance
425,000
0
Long Term Debt Payments
0
-350,000
Long Term Debt Issuance
425,000
0
Investing Cash Flow
-2,111,975
-88,809
Cash Flow From Continuing Investing Activities
-2,111,975
-88,809
Net Investment Purchase And Sale
11,379
131,075
Sale Of Investment
40,443
136,788
Purchase Of Investment
-29,064
-5,713
Net Business Purchase And Sale
-2,074,534
-178,843
Purchase Of Business
-2,074,534
-178,843
Net Intangibles Purchase And Sale
0
0
Sale Of Intangibles
0
0
Net PPE Purchase And Sale
-48,820
-41,041
Purchase Of PPE
-48,820
-41,041
Operating Cash Flow
355,782
553,495
Cash Flow From Continuing Operating Activities
355,782
553,495
Change In Working Capital
-263,265
51,531
Change In Other Working Capital
20,422
24,955
Change In Other Current Liabilities
-8,425
-995
Change In Other Current Assets
-1,870
-24,380
Change In Payables And Accrued Expense
-232,568
208,134
Change In Prepaid Assets
9,100
58,216
Change In Inventory
-31,376
-30,171
Change In Receivables
-18,548
-184,228
Other Non Cash Items
1,629
2,453
Stock Based Compensation
138,183
113,164
Provisionand Write Offof Assets
954
Deferred Tax
73,128
-23,708
Deferred Income Tax
73,128
-23,708
Depreciation Amortization Depletion
84,372
68,873
Depreciation And Amortization
84,372
68,873
Depreciation
84,372
68,873
Operating Gains Losses
-13,925
-46,954
Gain Loss On Investment Securities
-13,925
-46,954
14,865
Net Income From Continuing Operations
335,660
388,136
📊Quarterly mode — Graham Fair Value & 7 Criteria require annual data. Switch to Annual for full analysis.
Quarter vs Same Quarter Last Year
YoY strips seasonality
Revenue Growth (YoY)
Prior year: $1.2B▲ $1.5B+18.7%
Revenue growth vs same quarter last year strips seasonality. Consistent double-digit growth is a Buffett hallmark.
Gross Margin
Prior year: 86.5%▲ 85.4%-1.1pp
Buffett: consistent gross margin above 40% signals durable pricing power and competitive moat.
Operating Margin
Prior year: 34.7%▲ 29.3%-5.5pp
Graham: operating margin reflects true business economics before financing. Trend matters as much as level.
Net Margin
Prior year: 22.0%▲ 22.8%+0.7pp
Net margin can be distorted by one-time items, tax timing, or interest costs — compare to operating margin for signal quality.
Quarterly Health Checks
3 Graham/Buffett criteria that are valid and reliable on quarterly data
✅ Adequate Size
Graham required scale for resilience. Quarterly revenue × 4 gives an annualised proxy.
$1.5B/qtr (≈$5.9B ann.)
vs > $1.5B annualised revenue
❌ Financial Condition
Current assets vs current liabilities — a real-time liquidity snapshot. Valid and reliable on quarterly data.
1.47x current ratio
vs ≥ 2.0x
✅ Free Cash Flow
Buffett's most important single metric. A positive FCF quarter means the business generated real cash for owners after maintaining its asset base.
$307M
vs Positive
Operating Cash Flow
$356M
Latest quarter · Buffett's cash reality check
ROIC
3.4%
Based on latest annual operating income
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.
Market Cap / Net Assets
16.3x
Net Assets: $6.6B
Asset Context — Software - Application
Software companies store most of their value in code, IP, recurring revenue, and customer relationships — none of which appear on the balance sheet under GAAP. Book value and Net Assets are poor proxies for intrinsic value here. Focus on ROIC, gross margin trajectory, and free cash flow instead.
⚠️Revenue grew vs prior year but operating margin contracted. Possible explanations: deliberate investment in growth (hiring, marketing, R&D), input cost inflation, or pricing pressure from competition. Buffett distinguishes between spending that builds moat vs. spending that doesn't.
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)
5.1%
Weak — poor returns on equity
Return on Assets (ROA)
2.8%
Fair — average asset utilization
Share Buybacks (Latest Year)
$1.1B
Management is returning capital to shareholders via buybacks
Debt Trend YoY
+17.8% YoY
Debt is growing — management is leveraging up
Leadership Team
Anirudh Devgan Ph.
CEO, President & Director
Age 55
Pay: $2,271,043
0.677% of net income
John Wall
Senior VP & CFO
Age 54
Pay: $1,383,058
0.412% of net income
Paul Scannell
Senior Vice President of Global Customer Success Team
Age 59
Pay: $1,208,527
0.360% 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 C based on profitability, financial health, valuation and cash flow. Graham's
Fair Value: $25.66. Margin of safety: 0%. Gross profit margin: 85.4%. Operating margin: 29.3%. Net margin: 22.8%. 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.
Disclaimer: 360investing is provided for informational and educational purposes only and does not constitute financial, investment, legal, or tax advice. All data is sourced from public third-party providers
and may be delayed, inaccurate, or incomplete. Past performance is not indicative of future results. Analysis, scores, and valuations are algorithmic and do not represent professional investment recommendations. Always conduct your own due
diligence and consult a qualified financial adviser before making any investment decision. Use of this tool constitutes acceptance that 360investing and its operators bear no liability for decisions made based on information presented here.