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Cadence Design Systems (CDNS) Gains As Market Dips: What You Should Know

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Cadence Design Systems (CDNS - Free Report) closed the most recent trading day at $230.66, moving +0.91% from the previous trading session. This move outpaced the S&P 500's daily loss of 0.23%. Elsewhere, the Dow lost 0.31%, while the tech-heavy Nasdaq lost 0.09%.

Coming into today, shares of the maker of hardware and software products for validating chip designs had gained 0.24% in the past month. In that same time, the Computer and Technology sector lost 1.69%, while the S&P 500 lost 1.43%.

Investors will be hoping for strength from Cadence Design Systems as it approaches its next earnings release. On that day, Cadence Design Systems is projected to report earnings of $1.21 per share, which would represent year-over-year growth of 14.15%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $1 billion, up 10.9% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $5.09 per share and revenue of $4.08 billion. These totals would mark changes of +19.2% and +14.49%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for Cadence Design Systems. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. Cadence Design Systems currently has a Zacks Rank of #3 (Hold).

Looking at its valuation, Cadence Design Systems is holding a Forward P/E ratio of 44.94. This represents a premium compared to its industry's average Forward P/E of 27.34.

Investors should also note that CDNS has a PEG ratio of 2.45 right now. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. Computer - Software stocks are, on average, holding a PEG ratio of 2.37 based on yesterday's closing prices.

The Computer - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 170, putting it in the bottom 33% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

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