Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Paying user area
Try for free
Cadence Design Systems Inc. pages available for free this week:
- Statement of Comprehensive Income
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2005
- Debt to Equity since 2005
- Analysis of Debt
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Cadence Design Systems Inc. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
Cadence Design Systems Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial performance from 2021 through 2025 exhibits a transition from value creation to value destruction, characterized by a significant expansion of the capital base that outpaced the growth of operating returns.
- Net Operating Profit After Taxes (NOPAT)
- A consistent upward trajectory is observed in NOPAT, which grew from 761,220 thousand US$ in 2021 to 1,283,777 thousand US$ by 2025. This represents a steady increase in the absolute operating profitability of the entity over the five-year period.
- Cost of Capital
- The cost of capital remained remarkably stable throughout the analyzed period, fluctuating within a narrow range between 17.07% and 17.43%. This stability indicates that the hurdle rate for internal investments remained constant, removing it as a primary driver for the volatility seen in economic profit.
- Invested Capital Expansion
- Invested capital showed moderate growth between 2021 and 2023, rising from 3,138,367 thousand US$ to 4,056,689 thousand US$. However, a substantial increase occurred in 2024, where invested capital surged to 7,246,546 thousand US$, followed by a further increase to 8,067,529 thousand US$ in 2025. This sharp escalation in the capital base represents a significant shift in the company's asset intensity or investment strategy.
- Economic Profit Dynamics
- Economic profit was positive and increasing from 2021 to 2023, peaking at 294,468 thousand US$. However, the abrupt increase in invested capital in 2024 resulted in a capital charge that exceeded NOPAT, causing economic profit to swing to a deficit of -202,521 thousand US$. While a recovery is noted in 2025, with the deficit narrowing to -96,621 thousand US$ due to strong NOPAT growth, the entity failed to return to positive economic value added by the end of the period.
The analysis indicates that while the company successfully increased its absolute operating profits, the scale of capital deployment in 2024 and 2025 exceeded the returns generated by those assets. The shift to negative economic profit suggests that the incremental investments made during this period did not meet the required 17% cost of capital, thereby eroding shareholder value despite the growth in NOPAT.
Net Operating Profit after Taxes (NOPAT)
Cadence Design Systems Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in restructuring plans balance.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income.
9 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
Net income and net operating profit after taxes (NOPAT) both demonstrate a consistent upward trajectory over the five-year period. While net income shows steady growth, NOPAT exhibits a more pronounced increase, particularly in the later years of the observed timeframe. This suggests improving operational efficiency and profitability relative to the company’s total capital employed.
- NOPAT Trend
- NOPAT increased from US$761.22 million in 2021 to US$1,283.78 million in 2025. The growth was not linear; the increase from 2021 to 2022 was US$121.36 million, from 2022 to 2023 was US$118.95 million, from 2023 to 2024 was US$32.66 million, and from 2024 to 2025 was US$249.59 million. This indicates accelerating profitability in the most recent period.
- Relationship between Net Income and NOPAT
- While both metrics increased, NOPAT consistently exceeded net income throughout the period. This difference likely reflects non-operating items impacting net income, such as interest expense or gains/losses on investments. The gap between NOPAT and net income widened from approximately US$65.27 million in 2021 to approximately US$274.89 million in 2025, further supporting the notion of increasing operational performance relative to overall profitability.
The substantial growth in NOPAT, especially between 2024 and 2025, warrants further investigation to identify the key drivers. Potential factors could include increased sales volume, improved pricing strategies, cost reductions, or enhanced operational efficiencies. The consistent positive trend in both net income and NOPAT suggests a healthy and improving financial performance.
Cash Operating Taxes
Cadence Design Systems Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The provision for income taxes and cash operating taxes both demonstrate significant fluctuations over the five-year period. Both metrics increased substantially from 2021 to 2022, then exhibited varied movements in subsequent years.
- Provision for Income Taxes
- The provision for income taxes increased markedly from US$72.48 million in 2021 to US$196.41 million in 2022, representing a more than 170% increase. This was followed by a moderate increase to US$240.78 million in 2023. Further growth was observed in 2024, reaching US$340.34 million, before increasing again to US$413.16 million in 2025. This indicates a consistent, overall upward trend in reported income tax expense.
- Cash Operating Taxes
- Cash operating taxes also experienced a substantial rise from 2021 to 2022, increasing from US$119.67 million to US$308.19 million. However, unlike the provision for income taxes, cash operating taxes decreased in 2023 to US$279.99 million. A significant increase occurred in 2024, reaching US$473.17 million, before declining to US$352.20 million in 2025. The volatility in cash operating taxes suggests potential timing differences between taxable income and reported income, or changes in tax payment schedules.
The divergence between the provision for income taxes and cash operating taxes is notable. While the provision for income taxes consistently increased, cash operating taxes experienced a decrease in 2023 and again in 2025. This difference could be attributable to deferred tax assets or liabilities, tax credits utilized, or changes in the effective tax rate impacting cash flows. Further investigation into the underlying causes of these discrepancies would be beneficial for a complete understanding of the company’s tax position.
- Comparative Trends
- The ratio of cash operating taxes to the provision for income taxes varied over the period. In 2021, cash operating taxes were approximately 1.65 times the provision for income taxes. This ratio decreased to 1.57 in 2022, increased to 1.16 in 2023, rose to 1.39 in 2024, and fell to 0.85 in 2025. This fluctuating ratio reinforces the observation of differing trends between the two tax-related items.
The observed trends suggest a growing tax burden as indicated by the provision for income taxes, but the actual cash outflow for taxes is subject to more variability. The fluctuations in cash operating taxes warrant further scrutiny to determine the factors driving these changes and their impact on the company’s liquidity.
Invested Capital
Cadence Design Systems Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of deferred revenue.
5 Addition of restructuring plans balance.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of in-process capital assets.
9 Subtraction of short-term investments.
The invested capital of the company demonstrates a consistent upward trend over the five-year period. Simultaneously, significant fluctuations are observed in the components contributing to invested capital, namely total reported debt & leases and stockholders’ equity.
- Invested Capital Trend
- Invested capital increased from US$3,138,367 thousand in 2021 to US$8,067,529 thousand in 2025. This represents a cumulative increase of approximately 157% over the period. The rate of increase accelerated notably between 2023 and 2025.
- Debt & Leases
- Total reported debt & leases experienced a substantial increase from US$479,980 thousand in 2021 to US$924,152 thousand in 2022, representing a nearly 93% increase. It then decreased to US$806,033 thousand in 2023 before rising dramatically to US$2,626,630 thousand in 2024 and US$2,666,328 thousand in 2025. This suggests a period of increased borrowing followed by a temporary reduction, and then a significant re-increase in debt financing.
- Stockholders’ Equity
- Stockholders’ equity exhibited a more moderate, but consistent, growth pattern. It increased from US$2,740,675 thousand in 2021 to US$5,474,181 thousand in 2025, representing a cumulative increase of approximately 100%. The growth rate in stockholders’ equity appears to have accelerated in the later years of the period.
- Relationship between Components and Invested Capital
- While both debt and equity contribute to invested capital, the substantial increase in debt in 2024 and 2025 appears to be a primary driver of the accelerated growth in overall invested capital during those years. The contribution of equity to the overall invested capital is also increasing, but at a slower pace than the recent increases in debt.
The observed trends suggest a shift in the company’s capital structure towards greater reliance on debt financing, particularly in the most recent years. Further investigation into the reasons behind these financing decisions and their impact on financial performance would be warranted.
Cost of Capital
Cadence Design Systems Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Cadence Design Systems Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 exhibits a distinct transition from a period of consistent value creation to a phase of significant capital expansion resulting in temporary value destruction. An initial trend of growth in economic profit and a positive spread ratio shifted abruptly in 2024, coinciding with a substantial increase in invested capital.
- Economic Profit Trends
- From 2021 through 2023, economic profit demonstrated a steady upward trajectory, increasing from 216,055 thousand US$ to a peak of 294,468 thousand US$. However, a sharp reversal occurred in 2024, where the figure plummeted to negative 202,521 thousand US$. A partial recovery is observed by the end of 2025, as the loss narrowed to negative 96,621 thousand US$, indicating an improving trend in generating returns above the cost of capital.
- Invested Capital Expansion
- Invested capital grew moderately between 2021 and 2023, rising from 3,138,367 thousand US$ to 4,056,689 thousand US$. A significant surge is noted in 2024, where invested capital increased by approximately 78% to 7,246,546 thousand US$, further climbing to 8,067,529 thousand US$ by 2025. This aggressive expansion of the capital base correlates directly with the onset of negative economic profit.
- Economic Spread Ratio Analysis
- The economic spread ratio remained positive and relatively stable during the first three years, peaking at 7.26% in 2023, which signifies that the return on invested capital exceeded the cost of capital. The ratio turned negative in 2024, reaching -2.79% as the surge in invested capital outweighed the generated profits. By 2025, the ratio improved to -1.20%, suggesting a narrowing gap between the return on capital and the required cost of capital, moving back toward a break-even point of value creation.
The evidence suggests that the substantial increase in invested capital starting in 2024 initially eroded the economic spread, leading to a period where the company failed to cover its cost of capital. The subsequent improvement in both economic profit and the spread ratio in 2025 indicates that the entity is beginning to realize returns on the expanded capital base.
Economic Profit Margin
Cadence Design Systems Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by a significant divergence between top-line growth and economic value creation. While adjusted revenue demonstrated consistent and sustained annual expansion, economic profit experienced a severe reversal, transitioning from positive value creation to economic loss starting in 2024.
- Adjusted Revenue Trajectory
- A steady upward trend is observed in adjusted revenue, which increased from US$ 3,089,413 thousand in 2021 to US$ 5,378,610 thousand by 2025. This indicates a consistent expansion of the company's operational scale over the analyzed period.
- Economic Profit Fluctuations
- Economic profit grew incrementally between 2021 and 2023, reaching a peak of US$ 294,468 thousand. This period of value creation was followed by a sharp decline in 2024, with economic profit falling to negative US$ 202,521 thousand. A partial recovery was noted in 2025, as the economic loss narrowed to negative US$ 96,621 thousand.
- Economic Profit Margin Analysis
- The economic profit margin remained stable in the range of 6.65% to 7.23% from 2021 through 2023. A critical shift occurred in 2024, when the margin dropped to -4.28%, signaling that the returns on capital were insufficient to cover the cost of capital. Although the margin improved to -1.80% in 2025, it remained negative, indicating that the company did not return to generating positive economic value by the end of the period.