DCF Studio

    CDNS · NMS · Technology

    Cadence Design Systems, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 120.75

    Market price

    USD 329.51

    Implied upside

    -63.4%

    10-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · Price 2026-11-02 · Accounts to 2025-12-31

    Current EV/EBITDA of 47.7x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 120.75-63.4%
    Exit multiple
    USD 197.87-39.9%
    Market price
    USD 329.51

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35CAGR
    RevenueUSD 6.4bnUSD 7.3bnUSD 8.3bnUSD 9.2bnUSD 10.1bnUSD 11.0bnUSD 11.8bnUSD 12.4bnUSD 12.9bnUSD 13.2bn+8.4%
    EBITUSD 2.0bnUSD 2.2bnUSD 2.5bnUSD 2.8bnUSD 3.1bnUSD 3.4bnUSD 3.6bnUSD 3.8bnUSD 3.9bnUSD 4.0bn+8.4%
    NOPATUSD 1.5bnUSD 1.8bnUSD 2.0bnUSD 2.2bnUSD 2.4bnUSD 2.7bnUSD 2.8bnUSD 3.0bnUSD 3.1bnUSD 3.2bn+8.4%
    Add depreciation & amortisationUSD 256.1mUSD 293.0mUSD 330.9mUSD 368.7mUSD 405.4mUSD 439.7mUSD 470.3mUSD 496.1mUSD 515.9mUSD 528.8m+8.4%
    Less capital expenditureUSD -188.2mUSD -248.1mUSD -317.1mUSD -394.6mUSD -479.2mUSD -568.9mUSD -661.1mUSD -752.8mUSD -840.5mUSD -920.6m+19.3%
    Capex, % of revenue2.9%3.4%3.8%4.3%4.7%5.2%5.6%6.1%6.5%7.0%-
    Less increase in working capitalUSD -135.7mUSD -112.6mUSD -115.5mUSD -115.4mUSD -111.9mUSD -104.6mUSD -93.4mUSD -78.6mUSD -60.4mUSD -39.3m-12.9%
    Free cashflow to firmUSD 1.5bnUSD 1.7bnUSD 1.9bnUSD 2.1bnUSD 2.3bnUSD 2.4bnUSD 2.6bnUSD 2.7bnUSD 2.7bnUSD 2.8bn+7.2%
    Discount factor0.95670.87550.80130.73330.67110.61420.56210.51450.47080.4309-
    Present valueUSD 1.4bnUSD 1.5bnUSD 1.5bnUSD 1.5bnUSD 1.5bnUSD 1.5bnUSD 1.4bnUSD 1.4bnUSD 1.3bnUSD 1.2bn-
    Present Value Of The ForecastUSD 14.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.89%US 10-year Treasury (^TNX), 2026-11-02
    Equity risk premium4.23%Damodaran, January 2026
    Beta1.068Reported 1.102, pulled toward 1.0 (Blume)
    Cost of equity9.41%Risk-free + beta x equity risk premium
    Cost of debt5.29%Risk-free + 40bp, the spread for a AAA rating at 14.2x interest cover. Book interest / average debt was lower, at 4.5%.
    Market capitalisationUSD 90.4bn97.2% of capital
    Total debtUSD 2.6bn2.8% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.27%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 120.75

    56% of EV

    Forecast FCFF, final year
    USD 2.8bn
    Capex at depreciation, working capital in reinvestment
    USD 3.2bn
    Less reinvestment at g/ROIC (12.3% of NOPAT)
    USD -391.9m
    Capitalised
    USD 2.8bn
    ROIC (reported)
    20.3%
    Terminal value, undiscounted
    USD 42.3bn
    Terminal value, discounted
    USD 18.2bn
    Enterprise value
    USD 32.5bn
    Less net debt
    USD -539.1m
    Equity value
    USD 33.0bn

    Exit at 20.0x EBITDA

    Value per shareUSD 197.87

    73% of EV

    Terminal value, undiscounted
    USD 91.3bn
    Terminal value, discounted
    USD 39.3bn
    Enterprise value
    USD 53.5bn
    Less net debt
    USD -539.1m
    Equity value
    USD 54.1bn

    Spread between methods: 48%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.27%158.13164.30171.89181.41193.63
    8.27%134.02137.58141.86147.07153.49
    9.27%116.18118.27120.74123.71127.28
    10.27%102.47103.67105.10106.79108.82
    11.27%91.6092.2693.0493.9995.12

    Outlined: this model. Green text: above today's price of 329.51. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputActualModelImplied
    Revenue growth, a year14.1%9.6%22.9%
    EBIT margin31.1%30.5%83.5%
    Discount rate-9.3%5.0%
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.