If You Had Bought Cadence Design Systems (NASDAQ:CDNS) Stock Five Years Ago, You Could Pocket A 269% Gain Today
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the Cadence Design Systems, Inc. (NASDAQ:CDNS) share price has soared 269% in the last half decade. Most would be very happy with that. In more good news, the share price has risen 5.8% in thirty days.
View our latest analysis for Cadence Design Systems
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Cadence Design Systems achieved compound earnings per share (EPS) growth of 45% per year. This EPS growth is higher than the 30% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Cadence Design Systems has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Cadence Design Systems's financial health with this free report on its balance sheet.
A Different Perspective
It's nice to see that Cadence Design Systems shareholders have received a total shareholder return of 7.1% over the last year. However, that falls short of the 30% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Cadence Design Systems that you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
