Cadence Design Systems

Methodology

Cadence Design Systems' electronic design automation software provides essential tools for semiconductor chip design with high customer switching costs and recurring revenue. The company's duopoly with Synopsys creates pricing power and visibility. This fair value calculation works well for Cadence given the subscription-based model and steady demand from chip design complexity growth, though semiconductor industry cycles can impact customer spending.

Methodology

Cadence's PEG ratio typically ranges from 2.0-3.5, reflecting premium valuations for mission-critical EDA software with strong competitive moats and consistent double-digit growth. The company's expansion into system design and AI-driven tools justifies higher multiples than traditional enterprise software. Compare to Synopsys and other specialized software to assess whether Cadence's technology leadership and growth runway warrant its positioning.

Methodology

Cadence does not currently pay a dividend, reinvesting capital into R&D for next-generation chip design tools and expanding into adjacent markets. The PEGY mirrors the PEG, offering no additional insight. For Cadence investors, focus remains on design win momentum, customer spending on advanced nodes, and expansion beyond core EDA into hardware emulation and system design rather than income generation.