Stock Analysis on Net

Cadence Design Systems Inc. (NASDAQ:CDNS)

Economic Value Added (EVA)

Microsoft Excel

Economic Profit

Cadence Design Systems Inc., economic profit calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net operating profit after taxes (NOPAT)1 1,034,183 1,001,524 882,577 761,220 708,432
Cost of capital2 14.93% 15.24% 15.14% 15.19% 15.17%
Invested capital3 7,246,546 4,056,689 3,680,162 3,138,367 2,827,971
 
Economic profit4 (47,686) 383,438 325,501 284,630 279,295

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,034,18314.93% × 7,246,546 = -47,686

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Cadence Design Systems Inc. economic profit increased from 2022 to 2023 but then decreased significantly from 2023 to 2024.

Net Operating Profit after Taxes (NOPAT)

Cadence Design Systems Inc., NOPAT calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Net income 1,055,484 1,041,144 848,952 695,955 590,644
Deferred income tax expense (benefit)1 (128,737) (36,512) (107,606) (43,178) (26,117)
Increase (decrease) in allowance for doubtful accounts2 1,255 2,263 (1,402) 825 1,998
Increase (decrease) in deferred revenue3 88,626 (18,107) 126,972 101,169 125,038
Increase (decrease) in restructuring plans balance4 2,124 2,603 (43) (8,650) (945)
Increase (decrease) in equity equivalents5 (36,732) (49,753) 17,921 50,166 99,974
Interest expense 75,999 36,185 22,934 16,980 20,749
Interest expense, operating lease liability6 6,018 6,279 7,043 4,766 5,618
Adjusted interest expense 82,017 42,464 29,977 21,746 26,367
Tax benefit of interest expense7 (17,224) (8,917) (6,295) (4,567) (5,537)
Adjusted interest expense, after taxes8 64,793 33,547 23,682 17,179 20,830
Interest income (62,484) (29,637) (10,099) (2,634) (3,817)
Investment income, before taxes (62,484) (29,637) (10,099) (2,634) (3,817)
Tax expense (benefit) of investment income9 13,122 6,224 2,121 553 802
Investment income, after taxes10 (49,362) (23,413) (7,978) (2,081) (3,015)
Net operating profit after taxes (NOPAT) 1,034,183 1,001,524 882,577 761,220 708,432

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

3 Addition of increase (decrease) in deferred revenue.

4 Addition of increase (decrease) in restructuring plans balance.

5 Addition of increase (decrease) in equity equivalents to net income.

6 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 150,447 × 4.00% = 6,018

7 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 82,017 × 21.00% = 17,224

8 Addition of after taxes interest expense to net income.

9 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 62,484 × 21.00% = 13,122

10 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Cadence Design Systems Inc. NOPAT increased from 2022 to 2023 and from 2023 to 2024.

Cash Operating Taxes

Cadence Design Systems Inc., cash operating taxes calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Provision for income taxes 340,335 240,782 196,411 72,480 42,104
Less: Deferred income tax expense (benefit) (128,737) (36,512) (107,606) (43,178) (26,117)
Add: Tax savings from interest expense 17,224 8,917 6,295 4,567 5,537
Less: Tax imposed on investment income 13,122 6,224 2,121 553 802
Cash operating taxes 473,174 279,988 308,191 119,672 72,956

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Cadence Design Systems Inc. cash operating taxes decreased from 2022 to 2023 but then increased from 2023 to 2024 exceeding 2022 level.

Invested Capital

Cadence Design Systems Inc., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Revolving credit facility 100,000
Current portion of long-term debt 349,285
Long-term debt, excluding current portion 2,476,183 299,771 648,078 347,588 346,793
Operating lease liability1 150,447 156,977 176,074 132,392 147,836
Total reported debt & leases 2,626,630 806,033 924,152 479,980 494,629
Stockholders’ equity 4,673,578 3,404,271 2,745,113 2,740,675 2,493,018
Net deferred tax (assets) liabilities2 (951,722) (871,184) (838,932) (754,638) (727,356)
Allowance for doubtful accounts3 5,808 4,553 2,290 3,692 2,867
Deferred revenue4 852,581 763,955 782,062 655,090 553,921
Restructuring plans balance5 4,727 2,603 43 8,693
Equity equivalents6 (88,606) (100,073) (54,580) (95,813) (161,875)
Accumulated other comprehensive (income) loss, net of tax7 190,448 94,754 91,637 33,311 17,425
Adjusted stockholders’ equity 4,775,420 3,398,952 2,782,170 2,678,173 2,348,568
In-process capital assets8 (14,879) (17,937) (21,670) (13,830) (10,774)
Short-term investments9 (140,625) (130,359) (4,490) (5,956) (4,452)
Invested capital 7,246,546 4,056,689 3,680,162 3,138,367 2,827,971

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of deferred revenue.

5 Addition of restructuring plans balance.

6 Addition of equity equivalents to stockholders’ equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of in-process capital assets.

9 Subtraction of short-term investments.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Cadence Design Systems Inc. invested capital increased from 2022 to 2023 and from 2023 to 2024.

Cost of Capital

Cadence Design Systems Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 70,813,061 70,813,061 ÷ 73,398,508 = 0.96 0.96 × 15.35% = 14.81%
Outstanding debt3 2,435,000 2,435,000 ÷ 73,398,508 = 0.03 0.03 × 4.44% × (1 – 21.00%) = 0.12%
Operating lease liability4 150,447 150,447 ÷ 73,398,508 = 0.00 0.00 × 4.00% × (1 – 21.00%) = 0.01%
Total: 73,398,508 1.00 14.93%

Based on: 10-K (reporting date: 2024-12-31).

1 US$ in thousands

2 Equity. See details »

3 Outstanding debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 81,873,157 81,873,157 ÷ 82,677,105 = 0.99 0.99 × 15.35% = 15.20%
Outstanding debt3 646,971 646,971 ÷ 82,677,105 = 0.01 0.01 × 5.22% × (1 – 21.00%) = 0.03%
Operating lease liability4 156,977 156,977 ÷ 82,677,105 = 0.00 0.00 × 4.00% × (1 – 21.00%) = 0.01%
Total: 82,677,105 1.00 15.24%

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in thousands

2 Equity. See details »

3 Outstanding debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 50,684,958 50,684,958 ÷ 51,608,391 = 0.98 0.98 × 15.35% = 15.07%
Outstanding debt3 747,359 747,359 ÷ 51,608,391 = 0.01 0.01 × 4.71% × (1 – 21.00%) = 0.05%
Operating lease liability4 176,074 176,074 ÷ 51,608,391 = 0.00 0.00 × 4.00% × (1 – 21.00%) = 0.01%
Total: 51,608,391 1.00 15.14%

Based on: 10-K (reporting date: 2022-12-31).

1 US$ in thousands

2 Equity. See details »

3 Outstanding debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 37,498,601 37,498,601 ÷ 38,007,393 = 0.99 0.99 × 15.35% = 15.14%
Outstanding debt3 376,400 376,400 ÷ 38,007,393 = 0.01 0.01 × 4.38% × (1 – 21.00%) = 0.03%
Operating lease liability4 132,392 132,392 ÷ 38,007,393 = 0.00 0.00 × 3.60% × (1 – 21.00%) = 0.01%
Total: 38,007,393 1.00 15.19%

Based on: 10-K (reporting date: 2021-12-31).

1 US$ in thousands

2 Equity. See details »

3 Outstanding debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 37,148,178 37,148,178 ÷ 37,689,214 = 0.99 0.99 × 15.35% = 15.13%
Outstanding debt3 393,200 393,200 ÷ 37,689,214 = 0.01 0.01 × 4.38% × (1 – 21.00%) = 0.04%
Operating lease liability4 147,836 147,836 ÷ 37,689,214 = 0.00 0.00 × 3.80% × (1 – 21.00%) = 0.01%
Total: 37,689,214 1.00 15.17%

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in thousands

2 Equity. See details »

3 Outstanding debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Cadence Design Systems Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in thousands)
Economic profit1 (47,686) 383,438 325,501 284,630 279,295
Invested capital2 7,246,546 4,056,689 3,680,162 3,138,367 2,827,971
Performance Ratio
Economic spread ratio3 -0.66% 9.45% 8.84% 9.07% 9.88%
Benchmarks
Economic Spread Ratio, Competitors4
Accenture PLC 3.43% 4.22% 7.07% 8.91% 9.49%
Adobe Inc. 3.65% 3.87% 9.32% 11.72% 4.00%
CrowdStrike Holdings Inc. -4.73% -1.05% -4.32% -6.58% 4.27%
International Business Machines Corp. -6.42% -2.48% -10.28% -5.23% -4.88%
Intuit Inc. -5.76% -7.81% -6.72% 0.95% 4.33%
Microsoft Corp. 12.03% 15.07% 23.02% 32.04% 30.07%
Oracle Corp. -1.27% -2.29% -1.89% 6.19% 0.54%
Palantir Technologies Inc. -20.92% -17.62% -41.27% -48.76% -88.76%
Palo Alto Networks Inc. 7.28% 13.34% 5.27% -3.42% -4.37%
Salesforce Inc. -11.44% -13.69% -11.27% -9.00% -12.02%
ServiceNow Inc. 8.18% 7.47% 2.95% 4.16% 5.78%
Synopsys Inc. -5.33% -4.62% 1.96% -4.06% -3.88%
Workday Inc. -9.46% -15.75% -10.53% -15.78% -19.26%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Economic profit. See details »

2 Invested capital. See details »

3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -47,686 ÷ 7,246,546 = -0.66%

4 Click competitor name to see calculations.

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Cadence Design Systems Inc. economic spread ratio improved from 2022 to 2023 but then deteriorated significantly from 2023 to 2024.

Economic Profit Margin

Cadence Design Systems Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in thousands)
Economic profit1 (47,686) 383,438 325,501 284,630 279,295
 
Revenue 4,641,264 4,089,986 3,561,718 2,988,244 2,682,891
Add: Increase (decrease) in deferred revenue 88,626 (18,107) 126,972 101,169 125,038
Adjusted revenue 4,729,890 4,071,879 3,688,690 3,089,413 2,807,929
Performance Ratio
Economic profit margin2 -1.01% 9.42% 8.82% 9.21% 9.95%
Benchmarks
Economic Profit Margin, Competitors3
Accenture PLC 1.95% 2.17% 3.41% 4.57% 4.83%
Adobe Inc. 4.13% 4.84% 10.86% 14.61% 5.74%
CrowdStrike Holdings Inc. -7.42% -1.41% -6.76% -13.68% 3.75%
International Business Machines Corp. -11.36% -4.42% -17.85% -9.97% -8.49%
Intuit Inc. -8.85% -12.79% -12.93% 1.21% 4.87%
Microsoft Corp. 16.81% 17.16% 22.06% 26.59% 22.33%
Oracle Corp. -2.42% -4.44% -3.48% 12.24% 1.23%
Palantir Technologies Inc. -18.15% -9.45% -69.24% -80.31% -180.81%
Palo Alto Networks Inc. 7.72% 13.24% 6.14% -4.61% -7.10%
Salesforce Inc. -26.47% -34.88% -31.30% -20.65% -29.58%
ServiceNow Inc. 6.73% 6.01% 2.37% 3.60% 4.72%
Synopsys Inc. -8.93% -6.52% 2.76% -6.46% -6.67%
Workday Inc. -10.53% -19.32% -14.27% -20.59% -24.78%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 Economic profit. See details »

2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -47,686 ÷ 4,729,890 = -1.01%

3 Click competitor name to see calculations.

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Cadence Design Systems Inc. economic profit margin improved from 2022 to 2023 but then deteriorated significantly from 2023 to 2024.