This article is for education purposes only, and not to be taken as advice to buy/sell. Please do your own due diligence before committing to any trade/investment.
Technology.
We use it everyday.
It has become an integral part of our lives.
As the stock market corrects, technology stocks have held their ground. In fact, many have been soaring!
This could be due to the rise of Artificial Intelligence (AI) which has been hyped up by the media.
Regardless, I think that this technology stock which serves 4 huge industries is worth a watch. This stock is Cadence Design Systems.
Brief History of Cadence Design Systems
Source: cadence.com/en_US/home.html
Cadence Design Systems was founded in 1988 through a merger.
The mission of the new company was to offer software for computer platforms.
Cadence Design Systems formed a subsidiary in Japan which helped it become the world’s leading supplier of integrated circuits very quickly.
The company continued to innovate and expanded into systems design software through acquisitions and research and development. This allowed Cadence Design Systems to provide its customers with a full suit of support and consulting services, further cementing its dominance in the industry.
Today, Cadence Design Systems provides solutions to these 4 huge industries:
Source: cadence.com/en_US/home.html
It’s great knowing about the growth story of Cadence Design Systems.
Shall we dive into its business model and financials to uncover if its foundation is strong?
Business Model and Financials
Source: tradingview.com
Here, the very first thing to look at is its total revenue that’s represented by the bar in blue.
Cadence Design Systems’ total revenue has been growing steadily throughout, beginning from 2017. Its total revenue achieved the largest growth in 2022, with a staggering 19.2% growth!
This is a positive sign.
Next, let’s take a look at its net income.
Its net income was growing up till 2019. 2019 recorded the highest net income achieved by the company, at $989m (or 186% growth over 2018).
Cadence Design Systems’ net income took a hit in 2020 due to the COVID-19 pandemic. Its net income dropped 40.3%.
However, as the pandemic restrictions gradually eased, Cadence Design Systems’ net income grew fast in 2021 and 2022, making up for lost time.
The company operates a recurring revenue model which has been growing strong.
Source: cadence.com/en_US/home/company/investors.html
Source: cadence.com/en_US/home/company/investors.html
Technical Analysis on Cadence Design Systems (NASDAQ: CDNS)
Cadence Design Systems has a strong foundation. It has a bright outlook too.
Does its price chart signal otherwise?
Here, you can see that the share price of Cadence Design Systems is in a powerful uptrend.
This can be inferred from the overwhelming number of blue candles (solid and hollow).
So, is it a good idea to buy its shares for a position trade now?
Let’s refer to 2 indicators on its chart above – the red arrow and Trend Impulse Factor indicator.
The first indicator to watch for is the green arrow.
Is it present at the last candle of Cadence Design Systems?
Yes, it is!
A dark green bar of its Trend Impulse Factor indicator implies that the bullish momentum is highly likely to continue, providing you a wonderful opportunity to buy.
And it turns out to be dark green in color!
Both indicators are singing the same tune and your chances of success are high.
Conclusion
Source: pexels.com
Cadence Design Systems is an exciting company which has a presence in AI, aerospace, automotive, and more.
Over the years, it has grown to become a leader in the industry through mergers and acquisitions and research and development.
This approach to business, coupled with strong management, has laid out a solid foundation for the company.
The company has been reaping the rewards for years as shown by its growing total revenue and net income.
Furthermore, the indicators on its price chart reveal strength and momentum that’s likely to continue, presenting a lovely position trading opportunity.
The green arrow and Trend Impulse Factor indicator have been tested and proven. They form the TradersGPS (TGPS) system to help you decipher if a stock is a cut above its peers. You won’t have to feel in the dark and make wild guesses
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