Cadence Design Systems Inc. (NASDAQ:CDNS)

Gross Profit Margin

The gross profit margin demonstrated a generally strong performance over the five-year period, maintaining levels above 86%. Starting at 88.61% in 2020, it experienced a modest increase to 89.73% in 2021, followed by a slight decline through 2023, ending the year at 89.36%. However, a more noticeable decrease occurred in 2024, with the margin dropping to 86.05%, indicating some erosion in profitability at the gross level during the final reported year.

Operating Profit Margin

The operating profit margin showed a consistent upward trend from 2020 to 2023, increasing from 24.06% to a peak of 30.59%. This suggests improved operating efficiency or better cost management over these years. In 2024, there was a minor decline to 29.1%, which, while lower than the peak, still reflects a high level of operating profitability relative to earlier years.

Net Profit Margin

Net profit margin increased steadily from 22.02% in 2020 to 25.46% in 2023, reflecting enhanced net earnings relative to revenue. However, this positive trend reversed somewhat in 2024 with a decrease to 22.74%, signaling some pressure on net profitability, potentially due to increased expenses, taxes, or other factors affecting the bottom line.

Return on Equity (ROE)

ROE exhibited a strong upward trajectory from 23.69% in 2020 to a peak of 30.93% in 2022, indicating increasingly effective use of shareholder equity to generate profits. It remained high in 2023 at 30.58% before declining significantly to 22.58% in 2024. This sharp drop may reflect changes in profitability, equity structure, or capital efficiency.

Return on Assets (ROA)

ROA showed a consistent increase from 14.95% in 2020 to 18.36% in 2023, suggesting improving asset utilization to generate earnings. However, in 2024 a substantial decline to 11.76% occurred, pointing to a reduced efficiency in asset use or diminished earnings relative to total assets in that year.

The financial data reveals several notable trends over the five-year period in question.

Revenue

Revenue has exhibited a consistent upward trajectory, increasing from approximately 2.68 billion US dollars in 2020 to roughly 4.64 billion US dollars in 2024. This represents a significant growth, indicating an expanding business scale and potentially increasing market demand or successful sales strategies.

Gross Margin

The gross margin also follows a positive trend, rising from about 2.38 billion US dollars in 2020 to nearly 4.00 billion US dollars in 2024. This increase aligns with the revenue growth, suggesting that the company has been effective at scaling its production or service delivery while maintaining or improving cost controls to preserve and increase absolute gross profit.

Gross Profit Margin Percentage

The gross profit margin percentage exhibits a slightly different pattern. It started at 88.61% in 2020 and increased marginally to a peak of 89.73% in 2021. Subsequent years saw a gradual decline to 86.05% by 2024. Despite the decline, the margin remains high, indicating that although the company is generating a very strong profit relative to revenue, there may be slight increases in cost of goods sold or changes in product/service mix affecting profitability ratios.

In summary, the company has demonstrated robust growth in both revenue and gross margin over the period, reflecting successful expansion or operational improvements. However, the minor downward trend in the gross profit margin percentage in recent years suggests that profitability efficiency relative to sales is facing some pressure, warranting attention to cost management or pricing strategies to maintain high margin levels.

Income from Operations

The income from operations has shown a consistent upward trend over the five-year period. Starting at 645,552 thousand US dollars in 2020, it increased steadily each year to reach 1,350,763 thousand US dollars by 2024. This demonstrates robust growth in operational profitability.

Revenue

Revenue also exhibited a positive growth pattern throughout the period reviewed. It rose from 2,682,891 thousand US dollars in 2020 to 4,641,264 thousand US dollars in 2024. The increase each year indicates expanding sales or service activity, contributing to the company's overall financial strength.

Operating Profit Margin

The operating profit margin showed an improving trend from 2020 to 2023, rising from 24.06% to a peak of 30.59%. However, in 2024, there was a slight decline to 29.1%. Despite this minor decrease, the operating margin remains significantly higher than at the start of the period, suggesting enhanced operational efficiency or cost management over the years.

Overall Observations

The data reveals sustained growth in both revenue and income from operations, indicating effective business expansion and profitability improvement. The rise in operating profit margin until 2023 reflects better operational leverage or expense control, while the slight dip in 2024 could suggest emerging cost pressures or changes in pricing strategy. Nonetheless, the company's financial performance remains strong with a clear positive trajectory.

Revenue

The revenue shows a consistent upward trend over the five-year period. Starting from approximately 2.68 billion US dollars in 2020, it increased steadily each year, reaching around 4.64 billion US dollars by 2024. This represents a significant growth in sales, indicating successful business expansion or increased market demand.

Net Income

Net income has also experienced a positive trajectory, rising from about 591 million US dollars in 2020 to over 1.05 billion US dollars in 2024. This growth in net income is in line with the increase in revenue, suggesting effective cost management and profitability improvements over the period examined.

Net Profit Margin

The net profit margin percentage exhibits some variability despite the growth in absolute net income. It increased from 22.02% in 2020 to a peak of 25.46% in 2023, reflecting enhanced profitability relative to revenue. However, in 2024, the margin declined to 22.74%, indicating a reduction in efficiency or increased expenses relative to sales despite continued revenue growth.

Summary

Overall, the data reveals a strong upward trend in both revenue and net income, highlighting robust financial performance. The net profit margin's fluctuation near the end of the period suggests that while the company is growing, there may be emerging challenges affecting profit efficiency that warrant further investigation.

Net Income

The net income shows a consistent upward trend over the five-year period. Beginning at 590,644 thousand US dollars in 2020, it increased steadily each year to reach 1,055,484 thousand US dollars by the end of 2024. This represents a substantial growth in profitability, more than doubling over the timeframe.

Stockholders' Equity

Stockholders' equity also exhibits a positive trajectory, rising from 2,493,018 thousand US dollars in 2020 to 4,673,578 thousand US dollars in 2024. The growth is gradual and steady until 2022, after which there is a more pronounced increase, particularly between 2023 and 2024, indicating reinvestment of earnings or other equity enhancements.

Return on Equity (ROE)

ROE shows fluctuation within the period. It starts at 23.69% in 2020, increases to a peak of 30.93% in 2022, slightly decreases to 30.58% in 2023, and then drops more noticeably to 22.58% in 2024. Despite the overall increase in net income and equity, the decline in ROE in the final year suggests that the growth in net income was not proportionally higher than the expansion of equity, leading to a lower efficiency in generating profits from shareholders' equity.

Overall Analysis

The data reflects strong growth in both profitability and equity base over the five years. The steady rise in net income combined with the growing equity base generally suggests successful business expansion or improved operational performance. However, the decline in ROE in the last year could indicate potential dilution of return efficiency or increased capital deployment that has not yet translated into proportional profit increases. This could warrant monitoring in subsequent periods to determine whether this is a temporary variance or a longer-term trend.

Net Income

Net income demonstrated a continuous upward trajectory over the period analyzed, rising from 590,644 thousand US dollars in 2020 to 1,055,484 thousand US dollars in 2024. The growth was particularly notable between 2022 and 2023, where net income increased by approximately 22.5%, suggesting enhanced profitability and operational efficiency during this interval. The growth rate between 2023 and 2024 was more modest, indicating a possible slowdown in profit expansion.

Total Assets

Total assets exhibited a strong increasing trend, steadily climbing from 3,950,785 thousand US dollars in 2020 to 8,974,482 thousand US dollars in 2024. The most significant increase occurred between 2023 and 2024, with assets growing by nearly 58.3%, suggesting considerable investments or asset acquisitions in that year. This substantial asset growth may impact the company's leverage and capital structure going forward.

Return on Assets (ROA)

ROA showed an upward trend from 14.95% in 2020 to a peak of 18.36% in 2023, indicating improving efficiency in generating earnings relative to asset base during this period. However, there was a marked decline in ROA to 11.76% in 2024 despite the rise in net income, implying that the asset increase outpaced income growth, reducing overall asset profitability.

Summary

The company demonstrated consistent growth in both net income and total assets over the five-year period, highlighting expansion and profitability improvements. However, the sharp increase in assets by 2024 coupled with a decline in ROA suggests that recent asset additions have not yet fully translated into proportional income gains, potentially indicating a lag effect in asset utilization or investments that have not yet matured. Monitoring future income relative to asset growth will be critical in assessing ongoing operational efficiency.