Buffett Brain · Research note
Score updated 26 Sept 2026
CDNS· Technology
Cadence Design Systems
Cadence Design Systems' 88.9% gross margin and 19.7% 5-year ROIC indicate a strong moat, but the P/E of 87.3 raises valuation concerns.
Buffett fit
Strong fit
Owner
79
Durability
98
Management
62
Price
0
Score updated 26 Sept 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Technology stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
Owning 100% of Cadence would mean benefiting from its high of 88.9% and of 19.7%, suggesting efficient .
The full reasoning comes with a free account.
Cadence's business appears durable, with no EPS declines in the past 5 years and a strong from switching costs.
The full reasoning comes with a free account.
With a share count CAGR of -0.2% and a yield of 0.86%, Cadence shows discipline in .
The full reasoning comes with a free account.
The current valuation is a concern, with an earnings yield of 1.15% and an yield of 1.53%, both well below Buffett's preferred threshold.
The full reasoning comes with a free account.
Free account
Read the full Cadence Design Systems analysis free
- The full reasoning behind all four pillars
- The 5-year price target and the return it implies
- What would change the call
- Graham, Lynch and Greenblatt on the same stock
3 full analyses a week · no card needed
For and against
The strongest points on each side, with the numbers behind them.
In its favor
7- 1 of 88.9% is top-quintile within the technology sector.
- 2 of 31.1% is significantly above the sector's top-quintile cutoff.
- 35-year of 19.7% is top-quintile in the sector, indicating strong capital efficiency.
- 45-year EPS CAGR of 12.65% shows steady growth.
Concerns
7- 1 ratio of 87.3 suggests high valuation risk.
- 2EV/ of 63.9 indicates the stock is priced for high growth.
- 3 yield of 1.53% is below the preferred 8-10% threshold.
- 4Market cap vs retained earnings at -22.74 shows market skepticism.
Price history
$310+78.9%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
Cadence Design Systems provides software, hardware, and services for IC design, with a focus on functional verification and digital IC design. The company generates revenue through a combination of licensing fees and services, with a TTM revenue of $5.3B and a net margin of 21.2%. Its high of 88.9% suggests strong and efficient operations. The unit economics are robust, with /Net Income at 1.43, indicating high earnings quality.
How this analysis has moved
The call has held across 5 reviews.
Sep 27, 2026 → Oct 23, 2026
What other investors would say
The same company, judged by three other documented playbooks.
Keep researching
Similar companies in Technology
Free weekly email
Liked the read on CDNS? Get the next ones on Monday.
Every Monday: the stocks most of the seven investors newly agree on. One email, unsubscribe any time.
Research, not investment advice.
See the Buffett analysis of Cadence Design Systems
The score, the checklist and the full reasoning open with a free account. You get 3 full analyses a week, and this stock is the first one. No card needed.
Create a free account3 full analyses a week · no card needed
Already have an account? Sign in