Cadence Design Systems Inc. (NASDAQ:CDNS)

An examination of the presented financial ratios reveals several noteworthy trends between 2021 and 2025. Generally, the adjusted ratios demonstrate greater volatility than their reported counterparts, suggesting the adjustments significantly impact the financial picture. A consistent pattern emerges where adjusted ratios initially show improvement or stability, followed by a decline in later years, particularly from 2023 to 2025.

Asset Turnover

Reported total asset turnover experienced a slight increase from 0.68 in 2021 to 0.72 in 2023, before declining to 0.52 in both 2024 and 2025. The adjusted total asset turnover mirrored this trend, starting at 0.85 in 2021, remaining relatively stable at 0.86 in 2022, then decreasing to 0.58 by 2025. The adjusted ratio consistently exceeds the reported ratio, indicating the adjustments increase the efficiency with which assets are used to generate sales.

Liquidity

The reported current ratio exhibited a decrease from 1.77 in 2021 to 1.24 in 2023, followed by a substantial increase to 2.93 in 2024 and a slight decrease to 2.86 in 2025. The adjusted current ratio showed a more dramatic fluctuation, beginning at 4.12 in 2021, falling to 2.14 in 2023, and then surging to 6.36 in 2024 before settling at 5.45 in 2025. The adjustments consistently inflate the current ratio, suggesting a stronger short-term liquidity position than reported.

Leverage

Reported debt to equity and debt to capital ratios increased from 2021 to 2023, peaking at 0.27 and 0.21 respectively, before rising further to 0.53 and 0.35 in 2024, and decreasing slightly to 0.45 and 0.31 in 2025. The adjusted ratios followed a similar pattern, but at higher levels, indicating a greater reliance on debt financing when adjusted. Reported financial leverage increased from 1.60 in 2021 to 1.92 in 2024, then decreased to 1.85 in 2025. The adjusted financial leverage mirrored this trend, starting at 1.37 and peaking at 1.74 in 2024, before decreasing to 1.66 in 2025.

Profitability

Reported net profit margin remained relatively stable between 23.29% and 25.46% from 2021 to 2023, then decreased to 22.74% in 2024 and 20.94% in 2025. The adjusted net profit margin showed more variation, decreasing from 23.64% in 2021 to 21.92% in 2022, increasing to 24.27% in 2023, decreasing to 19.52% in 2024, and then increasing significantly to 27.02% in 2025. The adjustments appear to initially enhance profitability, but the impact becomes less consistent in later years.

Returns

Reported ROE decreased from 25.39% in 2021 to 20.26% in 2025, while adjusted ROE followed a similar pattern, declining from 27.61% to 26.15% over the same period. Reported ROA decreased from 15.87% in 2021 to 10.92% in 2025. Adjusted ROA showed a similar decline from 20.14% in 2021 to 15.73% in 2025. Both adjusted ROE and ROA were consistently higher than their reported counterparts, indicating a more efficient use of equity and assets when considering the adjustments.

In summary, the adjusted ratios generally present a more optimistic financial picture than the reported ratios, particularly regarding liquidity and returns. However, the downward trend observed in several adjusted ratios from 2023 to 2025 warrants further investigation to understand the underlying drivers of this change.

The adjusted total asset turnover ratio exhibited a fluctuating pattern over the five-year period. Initially, the ratio demonstrated strength, followed by a decline in later years. Revenue consistently increased throughout the period, while total assets also rose, though at a varying pace.

Adjusted Total Asset Turnover – Overall Trend

The adjusted total asset turnover began at 0.85 in 2021 and remained relatively stable at 0.86 in 2022. A slight decrease to 0.85 was observed in 2023. Subsequently, the ratio declined more significantly to 0.59 in 2024 and further to 0.58 in 2025. This indicates a diminishing efficiency in generating revenue from assets over time.

Revenue Growth

Adjusted revenue increased steadily from US$3,089,413 thousand in 2021 to US$5,378,610 thousand in 2025. The largest absolute increase occurred between 2023 and 2024, with an addition of US$658,011 thousand. The rate of revenue growth appears consistent year-over-year.

Asset Expansion

Adjusted total assets also increased consistently, moving from US$3,626,221 thousand in 2021 to US$9,239,303 thousand in 2025. The most substantial increase in assets occurred between 2023 and 2024, rising by US$1,204,190 thousand. This increase in assets outpaced the revenue growth in the latter part of the period.

Relationship Between Revenue and Assets

While revenue consistently increased, the growth in adjusted total assets was more pronounced in 2024 and 2025. This accelerated asset growth, coupled with continued revenue increases, contributed to the observed decline in the adjusted total asset turnover ratio. The ratio suggests that, in later years, a greater investment in assets was required to generate each dollar of revenue.

The decreasing trend in the adjusted total asset turnover ratio, despite increasing revenue, warrants further investigation to determine the underlying causes. Potential factors could include changes in asset composition, increased working capital requirements, or less efficient asset utilization.

The adjusted current ratio exhibits significant fluctuations over the observed period. Initially high, the ratio decreased before increasing substantially in later years. A detailed examination of the components and the resulting ratio reveals notable trends in the company’s short-term liquidity position.

Adjusted Current Ratio - Overall Trend

The adjusted current ratio began at 4.12 in 2021, indicating a very strong ability to cover short-term liabilities with short-term assets. A decline was observed in subsequent years, reaching 2.14 in 2023. However, a substantial increase occurred in 2024, with the ratio rising to 6.36, and remained elevated at 5.45 in 2025. This suggests a strengthening liquidity position in the latter part of the period.

Adjusted Current Assets

Adjusted current assets demonstrated a modest increase from US$1,719,461 thousand in 2021 to US$1,709,057 thousand in 2022, followed by a further increase to US$1,980,770 thousand in 2023. A significant surge occurred between 2023 and 2024, reaching US$4,021,887 thousand, and continued to rise to US$4,673,561 thousand in 2025. This growth in adjusted current assets is a primary driver of the observed changes in the adjusted current ratio.

Adjusted Current Liabilities

Adjusted current liabilities increased from US$417,283 thousand in 2021 to US$657,158 thousand in 2022, and continued to rise to US$925,843 thousand in 2023. A notable decrease was observed in 2024, falling to US$632,692 thousand, before increasing again to US$856,856 thousand in 2025. The fluctuations in adjusted current liabilities contribute to the overall volatility in the adjusted current ratio, though to a lesser extent than the changes in adjusted current assets.

Comparison to Reported Current Ratio

The adjusted current ratio consistently presents a different picture of the company’s liquidity compared to the reported current ratio. The reported current ratio shows a more moderate trend, while the adjusted current ratio reveals more substantial swings. This difference suggests that the adjustments made to current assets and liabilities have a significant impact on the assessment of short-term liquidity.

In summary, the company experienced a period of fluctuating short-term liquidity, as indicated by the adjusted current ratio. While the ratio declined in the early years of the period, it demonstrated a strong recovery and improvement in the later years, driven primarily by substantial growth in adjusted current assets.

The adjusted debt to equity ratio for the period demonstrates an increasing trend, albeit with some fluctuation. Initially, the ratio rose significantly before stabilizing and then increasing again. This suggests a changing capital structure over the observed timeframe.

Adjusted Debt to Equity Ratio - Overall Trend

The adjusted debt to equity ratio increased from 0.18 in 2021 to 0.34 in 2022, representing a substantial rise. It then decreased to 0.24 in 2023, before increasing again to 0.57 in 2024 and settling at 0.48 in 2025. This pattern indicates a growing reliance on debt financing, particularly noticeable between 2021 and 2024.

Comparison to Reported Debt to Equity

The adjusted debt to equity ratio consistently exceeds the reported debt to equity ratio across all observed years. The difference between the two ratios suggests that adjustments are being made to either the debt or equity figures, resulting in a higher leverage position when considering the adjusted values. The magnitude of the difference appears to be increasing over time.

Adjusted Total Debt and Equity Trends

Adjusted total debt increased from US$479,980 thousand in 2021 to US$2,666,328 thousand in 2025. Adjusted stockholders’ equity also increased, moving from US$2,644,862 thousand in 2021 to US$5,556,802 thousand in 2025. While both components increased in absolute terms, the faster growth of adjusted total debt contributed to the rising adjusted debt to equity ratio.

Year-over-Year Changes

The largest year-over-year increase in the adjusted debt to equity ratio occurred between 2022 and 2024, rising from 0.34 to 0.57. This coincides with a significant increase in adjusted total debt. The increase from 2021 to 2022 was also substantial, indicating a period of active debt financing. The most recent year, 2025, shows a slight decrease in the ratio, potentially indicating a moderation in debt accumulation relative to equity growth.

In summary, the adjusted debt to equity ratio reveals a trend of increasing leverage, punctuated by a slight decrease in the most recent year. The consistent difference between reported and adjusted ratios warrants further investigation into the nature of the adjustments being applied.

The adjusted debt to capital ratio for the observed period demonstrates an increasing trend, albeit with some fluctuation. Total debt and total capital both increased over the five-year period, but the adjusted debt figures show a more pronounced growth pattern, resulting in a consistently higher ratio compared to the reported figures. This suggests that the adjustments made to total debt and capital significantly impact the leverage assessment.

Adjusted Debt to Capital Ratio - Trend Analysis

The adjusted debt to capital ratio rose from 0.15 in 2021 to 0.26 in 2022, representing a substantial increase. It then moderated to 0.20 in 2023 before climbing again to 0.36 in 2024. The ratio settled at 0.32 in 2025. This pattern indicates increasing financial leverage, followed by a period of stabilization, and then renewed increase. The 2024 peak suggests a significant increase in debt relative to adjusted capital during that year.

Total Debt and Total Capital - Comparative Growth

While both total debt and total capital exhibited growth throughout the period, the increase in adjusted total debt was proportionally larger than the increase in adjusted total capital. From 2021 to 2024, adjusted total debt increased by approximately 548%, while adjusted total capital increased by approximately 131%. This disparity contributed to the upward trend in the adjusted debt to capital ratio.

Relationship between Reported and Adjusted Ratios

The adjusted debt to capital ratio consistently exceeded the reported debt to capital ratio across all observed years. The difference between the two ratios suggests that the adjustments applied to total debt and total capital have a material effect on the assessment of the company’s financial leverage. The magnitude of the difference varied, but the adjusted ratio always presented a higher leverage profile.

In summary, the observed trend in the adjusted debt to capital ratio suggests a growing reliance on debt financing relative to adjusted capital. The adjustments made to the debt and capital figures appear to provide a more comprehensive view of the company’s leverage position than the reported figures alone. Continued monitoring of this ratio, alongside the underlying components of debt and capital, is recommended.

An examination of the financial information reveals trends in adjusted financial leverage over a five-year period. Total assets and stockholders’ equity both demonstrate consistent growth from 2021 to 2025. However, adjustments to these figures result in slightly lower values, impacting the calculated adjusted financial leverage.

Adjusted Financial Leverage – Overall Trend

Adjusted financial leverage exhibits an increasing trend from 2021 to 2024, rising from 1.37 to 1.74. A slight decrease is then observed in 2025, with the ratio settling at 1.66. This suggests a growing reliance on financial leverage, followed by a stabilization in the most recent year.

Adjusted Financial Leverage – Year-over-Year Changes

The largest year-over-year increase in adjusted financial leverage occurred between 2021 and 2022, increasing by 0.22. A subsequent increase of 0.08 was noted between 2022 and 2023. The increase slowed between 2023 and 2024, rising by 0.29, before decreasing by 0.08 between 2024 and 2025.

Relationship to Adjusted Assets and Equity

Adjusted total assets increased consistently throughout the period, mirroring the trend in reported total assets, though at a lower magnitude. Similarly, adjusted stockholders’ equity also increased annually. The adjustments to both assets and equity appear to moderate the overall leverage ratio compared to the reported figures. The consistent growth in both adjusted asset and equity values suggests a healthy expansion of the company’s financial base, even after adjustments.

Comparison to Reported Leverage

Reported financial leverage generally tracks the adjusted leverage, but remains consistently higher. The difference between the reported and adjusted ratios remained relatively stable throughout the period, indicating a consistent methodology in the adjustments applied. The reported leverage also shows a similar pattern of increase followed by stabilization.

In summary, the adjusted financial leverage indicates a moderate increase in financial risk between 2021 and 2024, followed by a slight reduction in 2025. The consistent growth in adjusted assets and equity provides a foundation for this leverage, while the adjustments themselves suggest a conservative approach to financial reporting.

The adjusted net profit margin exhibited fluctuations over the five-year period. Initial values were relatively stable, followed by a notable increase in the final year analyzed. A closer examination reveals a complex pattern of increases and decreases, suggesting underlying shifts in the company’s cost structure or revenue mix.

Overall Trend

From 2021 to 2025, the adjusted net profit margin demonstrated an overall upward trajectory, despite interim declines. The margin began at 23.64% in 2021, decreased to 21.92% in 2022, increased to 24.27% in 2023, decreased again to 19.52% in 2024, and then rose significantly to 27.02% in 2025.

Year-over-Year Changes

A decrease of 1.72 percentage points was observed in the adjusted net profit margin between 2021 and 2022. This was followed by an increase of 2.35 percentage points from 2022 to 2023. A subsequent decrease of 4.75 percentage points occurred between 2023 and 2024. The most substantial change was the increase of 7.50 percentage points from 2024 to 2025.

Comparison to Reported Net Profit Margin

The adjusted net profit margin generally tracked the reported net profit margin, but with notable differences in magnitude and timing. The adjusted figures consistently presented a slightly different picture, indicating the impact of adjustments made to net income and revenue. The largest divergence occurred in 2025, where the adjusted net profit margin significantly exceeded the reported margin, suggesting substantial adjustments were made in that year.

Revenue and Net Income Relationship

The adjusted net income and adjusted revenue both increased consistently over the period. However, the fluctuations in the adjusted net profit margin suggest that the growth in net income did not always keep pace with the growth in revenue, and vice versa. The substantial increase in the margin in 2025 indicates a disproportionately larger increase in adjusted net income relative to adjusted revenue.

The volatility in the adjusted net profit margin warrants further investigation to understand the nature of the adjustments being made and their impact on the company’s profitability. The significant increase in 2025 is particularly noteworthy and should be examined in detail.

The adjusted return on equity (ROE) exhibited fluctuations over the five-year period. Net income and stockholders’ equity, the components of ROE, both demonstrated an overall upward trajectory, though with some variation year-to-year. The adjusted ROE generally mirrored these trends, showing periods of growth and decline.

Adjusted ROE Trend

The adjusted ROE began at 27.61% in 2021 and increased slightly to 30.05% in 2022. It remained relatively stable at 29.91% in 2023 before decreasing to 20.13% in 2024. A significant increase was then observed in 2025, with the adjusted ROE reaching 26.15%.

Relationship to Net Income

The decrease in adjusted ROE in 2024 coincided with a decrease in adjusted net income. While stockholders’ equity continued to grow in 2024, the slower growth of net income relative to equity contributed to the decline in the ROE figure. The substantial increase in adjusted ROE in 2025 was driven by a considerable rise in adjusted net income, exceeding the growth rate of adjusted stockholders’ equity.

Comparison to Reported ROE

The adjusted ROE values were consistently higher than the reported ROE values across all years. The difference between the reported and adjusted ROE suggests that adjustments made to net income and stockholders’ equity had a positive impact on the calculated return. The trends observed in both the reported and adjusted ROE were similar, though the magnitude of the fluctuations differed.

Stockholders’ Equity Growth

Adjusted stockholders’ equity increased steadily from US$2,644,862 thousand in 2021 to US$5,556,802 thousand in 2025. The rate of growth accelerated in the later years of the period, particularly between 2023 and 2025. This growth in equity provided a larger base for generating returns.

In summary, the adjusted ROE experienced a period of moderate growth followed by a decline and then a substantial recovery. These fluctuations were closely linked to changes in adjusted net income and the continued expansion of adjusted stockholders’ equity. The consistent difference between reported and adjusted ROE highlights the significance of the adjustments made to these financial figures.

The adjusted return on assets (ROA) exhibited fluctuations over the five-year period. While generally higher than the reported ROA, the adjusted ROA did not demonstrate a consistently increasing or decreasing trend.

Overall Trend

The adjusted ROA began at 20.14% in 2021, decreased to 18.87% in 2022, then increased to a peak of 20.61% in 2023. A subsequent decline to 11.54% was observed in 2024, followed by a recovery to 15.73% in 2025.

Comparison to Reported ROA

Throughout the period, the adjusted ROA consistently exceeded the reported ROA. The difference between the two metrics varied annually, suggesting the adjustments made to net income and total assets had a material impact on the overall profitability assessment. The largest difference occurred in 2025, with the adjusted ROA being 4.81 percentage points higher than the reported ROA.

Adjusted Net Income Influence

Adjusted net income increased from US$730,235 thousand in 2021 to US$1,453,250 thousand in 2025. However, the increase was not linear, with a decrease observed between 2023 and 2024. This fluctuation in adjusted net income contributed to the variability in the adjusted ROA.

Adjusted Total Assets Influence

Adjusted total assets also increased over the period, rising from US$3,626,221 thousand in 2021 to US$9,239,303 thousand in 2025. The most significant increase in adjusted total assets occurred between 2023 and 2024, which coincided with the largest decrease in adjusted ROA. This suggests that the growth in assets may not have been proportionally matched by growth in adjusted net income during that year.

The decline in adjusted ROA in 2024 warrants further investigation to understand the specific factors contributing to the reduced profitability relative to asset base. The recovery in 2025 indicates a potential stabilization or improvement in asset utilization and profitability.