Cadence Design Systems, Inc. (NASDAQ:CDNS) shareholders are probably feeling a little disappointed, since its shares fell 9.2% to US$283 in the week after its latest second-quarter results. It looks like a credible result overall - although revenues of US$1.1b were in line with what the analysts predicted, Cadence Design Systems surprised by delivering a statutory profit of US$0.84 per share, a notable 10% above expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

Taking into account the latest results, the current consensus from Cadence Design Systems' 16 analysts is for revenues of US$4.62b in 2024. This would reflect a solid 11% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to accumulate 4.2% to US$4.01. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$4.60b and earnings per share (EPS) of US$4.11 in 2024. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

The consensus price target held steady at US$324, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Cadence Design Systems, with the most bullish analyst valuing it at US$355 and the most bearish at US$240 per share. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. The analysts are definitely expecting Cadence Design Systems' growth to accelerate, with the forecast 23% annualised growth to the end of 2024 ranking favourably alongside historical growth of 13% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 12% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Cadence Design Systems is expected to grow much faster than its industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Cadence Design Systems. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$324, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Cadence Design Systems analysts - going out to 2026, and you can see them free on our platform here.

You can also see whether Cadence Design Systems is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com