Financial statement analysis and common stock valuation

Capital Asset Pricing Model (CAPM)

CAPM is a theory concentrated with deriving the expected rates of return on risky assets based on the assets’ systematic risk levels. Systematic risk is the variability of returns that is due to macroeconomic factors that affect all risky assets. It cannot be eliminated by diversification.

• Rates of Return
• Variance and Covariance
• Systematic Risk (β) Estimation
• Expected Rate of Return

Common-Size Income Statement
Quarterly Data

Income statement components (revenues and expenses) shown as percentage of total sales.

Analysis of Long-term (Investment) Activity Ratios
Quarterly Data

Measures how efficiently Cadence Design Systems Inc. generates revenues from its investments in fixed or total assets.

• Long-term Activity Ratios (Summary)
• Net Fixed Asset Turnover
• Total Asset Turnover
• Equity Turnover

Income Statement

The income statement (statement of earnings) reports on the performance of Cadence Design Systems Inc., the result of its operating activities.

Analysis of Solvency Ratios
Quarterly Data

Examines Cadence Design Systems Inc. capital structure in terms of the mix of its financing sources and the ability of the firm to satisfy its longer-term debt and investment obligations.

• Solvency Ratios (Summary)
• Debt to Equity
• Debt to Capital
• Debt to Assets
• Financial Leverage
• Interest Coverage

Common Stock Valuation Ratios

Relative valuation technique determine the value of Cadence Design Systems Inc. by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock value, such as earnings, book value, and sales.

• Current Valuation Ratios
• Historical Valuation Ratios (Summary)
• Price to Earnings (P/E)
• Price to Operating Profit (P/OP)
• Price to Sales (P/S)
• Price to Book Value (P/BV)

Analysis of Short-term (Operating) Activity Ratios

Evaluates revenues and output generated by the Cadence Design Systems Inc. assets. Operating performance ratios describe the relationship between the Cadence Design Systems Inc. level of operations and the assets needed to sustain operating activities.

• Short-term Activity Ratios (Summary)
• Inventory Turnover
• Receivables Turnover
• Payables Turnover
• Working Capital Turnover
• Average Inventory Processing Period
• Average Receivable Collection Period
• Operating Cycle
• Average Payables Payment Period
• Cash Conversion Cycle

Aggregate Accruals

Financial reporting quality relates to the accuracy with which Cadence Design Systems Inc. reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows.
Aggregate accruals deriving measures of the accrual component of Cadence Design Systems Inc. earnings.

• Balance-Sheet-Based Accruals Ratio
• Cash-Flow-Statement-Based Accruals Ratio

Dividend Discount Model (DDM)

The dividend discount model (DDM) is a technique for estimating the value of a share of Cadence Design Systems Inc. common stock issue as the present value of all future dividends.

• Intrinsic Stock Value (Valuation Summary)
• Required Rate of Return (r)
• Dividend Growth Rate (g)

Balance Sheet: Assets
Quarterly Data

The assets reports major classes and amounts of resources owned or controlled by Cadence Design Systems Inc..

Enterprise Value to FCFF (EV/FCFF)

Free cash flow to the firm is the cash flow available to the Cadence Design Systems Inc. suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.

• Free Cash Flow to The Firm (FCFF)
• Interest Paid, Net of Tax
• EV to FCFF Ratio, Current
• EV to FCFF Ratio, Historical

Statement of Comprehensive Income

Comprehensive income is the change in equity (net assets) of Cadence Design Systems Inc. during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.