Let's talk about the popular Cadence Design Systems, Inc. (NASDAQ:CDNS). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, could the stock still be trading at a relatively cheap price? Let's examine Cadence Design Systems's valuation and outlook in more detail to determine if there's still a bargain opportunity.

What Is Cadence Design Systems Worth?

Cadence Design Systems appears to be overvalued by 22% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$282 on the market compared to our intrinsic value of $231.18. This means that the opportunity to buy Cadence Design Systems at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Cadence Design Systems's share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Cadence Design Systems generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. Cadence Design Systems' earnings over the next few years are expected to increase by 69%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? CDNS's optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CDNS should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you've been keeping tabs on CDNS for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the optimistic prospect is encouraging for CDNS, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for Cadence Design Systems mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.

If you are no longer interested in Cadence Design Systems, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.