Cadence Design Systems Inc. (NASDAQ:CDNS)

Return on Assets (ROA)

The Return on Assets demonstrated an overall upward trend from 14.95% in 2020 to a peak of 18.36% in 2023, followed by a notable decline to 11.76% in 2024. This indicates increasing efficiency in asset utilization until 2023, after which performance decreased significantly in the subsequent year.

Financial Leverage

Financial leverage showed fluctuations over the period. Beginning at 1.58 in 2020, it increased slightly to 1.60 in 2021, then rose more sharply to 1.87 in 2022. It decreased to 1.67 in 2023 before rising again to a high of 1.92 in 2024. This suggests varying reliance on debt financing, with a generally higher leverage level towards the end of the period.

Return on Equity (ROE)

Return on Equity increased steadily from 23.69% in 2020 to a maximum of 30.93% in 2022. It remained high at 30.58% in 2023 before declining to 22.58% in 2024. The pattern of ROE closely mirrors that of ROA, indicating that equity profitability improved significantly until 2022–2023 and then experienced a downturn in 2024.

Net Profit Margin

The net profit margin showed a generally positive trend from 2020 through 2023, increasing from 22.02% to a peak of 25.46% in 2023. However, in 2024, there was a noticeable decline to 22.74%, indicating a reduction in profitability relative to revenue compared to the previous year.

Asset Turnover

Asset turnover remained relatively stable between 2020 and 2023, fluctuating slightly around the 0.68 to 0.72 ratio range. In 2024, it experienced a significant drop to 0.52, suggesting that the company generated less revenue per unit of assets during this period.

Financial Leverage

Financial leverage demonstrated variability over the period, with a slight increase from 1.58 in 2020 to 1.60 in 2021, followed by a notable rise to 1.87 in 2022. It then decreased to 1.67 in 2023 before increasing again to the highest recorded level of 1.92 in 2024. This indicates fluctuating reliance on debt relative to equity financing, reaching a peak in the latest year.

Return on Equity (ROE)

Return on equity exhibited a strong upward trend from 23.69% in 2020 to a high of 30.93% in 2022. It slightly decreased to 30.58% in 2023, followed by a significant decline to 22.58% in 2024, which is below the starting point in 2020. The decline in 2024 suggests a reduction in overall profitability from shareholders' equity compared to prior years.

Tax Burden

The tax burden ratio shows a consistent decline over the period, decreasing from 0.93 in 2020 to 0.76 in 2024. This suggests a gradual reduction in the proportion of earnings paid in taxes, which may contribute positively to net profitability.

Interest Burden

The interest burden remains relatively stable with a slight downward trend from 0.97 in 2020 to 0.95 in 2024. This indicates that interest expenses have remained fairly constant relative to earnings before interest and taxes, with only a minor increase in interest charges or decrease in EBIT affecting the ratio.

EBIT Margin

The EBIT margin shows a strong upward trend from 24.36% in 2020 to a peak of 32.23% in 2023, followed by a slight decline to 31.71% in 2024. This improvement suggests enhanced operational efficiency or pricing power over the years, although a minor erosion was seen in the latest period.

Asset Turnover

Asset turnover remains stable around 0.68-0.72 between 2020 and 2023, indicating consistent utilization of assets to generate sales. However, there is a notable decline to 0.52 in 2024, which could point to lower sales generation efficiency or increased asset base without proportional revenue growth during the latest year.

Financial Leverage

Financial leverage fluctuates across the years, rising from 1.58 in 2020 to a peak of 1.92 in 2024, with a dip in 2023 to 1.67. This suggests increasing reliance on debt or other liabilities relative to equity, possibly reflecting strategic financing decisions to support growth or capital expenditures.

Return on Equity (ROE)

ROE demonstrates growth from 23.69% in 2020 to a peak of 30.93% in 2022, maintaining similarly high levels in 2023 at 30.58%. In 2024, ROE declines noticeably to 22.58%, which may be attributable to the decreased asset turnover and slight reduction in EBIT margin, as well as increased financial leverage impacting net returns to shareholders.

Net Profit Margin

The net profit margin demonstrates a generally positive trajectory from 2020 to 2023, increasing from 22.02% to a peak of 25.46%. However, there is a noticeable decline in 2024, where the margin decreases to 22.74%. This suggests that profitability in terms of net income relative to sales improved steadily for several years before experiencing a downturn in the most recent period.

Asset Turnover

The asset turnover ratio remains relatively stable between 2020 and 2023, fluctuating slightly around 0.68 to 0.72. In 2024, there is a marked decrease to 0.52, indicating a reduction in the efficiency with which the company utilizes its assets to generate revenue during that year.

Return on Assets (ROA)

Return on assets exhibits an upward trend from 14.95% in 2020 to 18.36% in 2023, reflecting improvements in the company's ability to generate profit from its asset base. Similar to the other metrics, 2024 sees a significant decline to 11.76%, suggesting diminished profitability relative to assets in the latest year.

Overall Observations

From 2020 through 2023, financial performance indicators show consistent improvement, with increases in net profit margin and ROA accompanied by stable asset turnover. The declines in all three measures in 2024 suggest a potential shift in operational efficiency and profitability that warrants further investigation to identify underlying causes and future implications.

The financial data reveals several notable trends over the five-year period from 2020 to 2024. The tax burden ratio consistently decreased from 0.93 in 2020 to 0.76 in 2024, indicating a gradual reduction in the proportion of earnings paid as taxes. This trend suggests improving tax efficiency or possibly changing tax regulations or strategies.

The interest burden ratio remained relatively stable with minor fluctuations, starting at 0.97 in 2020, peaking slightly at 0.98 in 2021 and 2022, then slightly declining to 0.95 in 2024. This steadiness indicates consistent management of interest expenses relative to earnings before interest and taxes.

The EBIT margin showed a clear upward trend from 24.36% in 2020 to a peak of 32.23% in 2023, followed by a slight dip to 31.71% in 2024. This improvement demonstrates enhanced operational efficiency and profitability before interest and taxes over the observed period.

Asset turnover was stable around 0.68-0.69 during 2020 to 2022, improved to 0.72 in 2023, but then dropped notably to 0.52 in 2024. The initial stability and subsequent rise suggest improving asset utilization, but the sharp decrease in the final year could indicate reduced efficiency in generating sales from assets or a significant change in asset base or sales volume.

Return on assets (ROA) experienced growth from 14.95% in 2020 to 18.36% in 2023, reflecting overall increased profitability relative to asset base during this period. However, ROA declined substantially to 11.76% in 2024, paralleling the drop in asset turnover, which likely impacted overall asset efficiency and profitability.

Tax Burden

Consistent decrease over time indicates improving tax efficiency.

Interest Burden

Largely stable, suggesting steady interest management.

EBIT Margin

Increasing profitability before interest and tax, peaking in 2023.

Asset Turnover

Stable with improvement until 2023, followed by a significant decline in 2024.

Return on Assets (ROA)

Growth until 2023, then noticeable decline in 2024, indicating decreased efficiency and profitability.

Tax Burden

The tax burden ratio demonstrates a declining trend from 0.93 in 2020 to 0.76 in 2024. This decrease suggests a progressively lower proportion of pre-tax earnings is being paid in taxes over the observed periods, potentially indicating improved tax efficiency or changes in tax regulations impacting the company favorably.

Interest Burden

The interest burden ratio remains relatively stable, fluctuating slightly between 0.95 and 0.98 over the five-year period. This stability implies consistent control over interest expenses relative to earnings before interest and taxes (EBIT), reflecting steady financial leverage or borrowing costs.

EBIT Margin

The EBIT margin displays a clear upward trend, increasing from 24.36% in 2020 to peak at 32.23% in 2023 before experiencing a slight decrease to 31.71% in 2024. This improvement over time indicates enhanced operational efficiency or higher profitability from core business activities, with only a minor decline in the final year still keeping margins significantly above earlier levels.

Net Profit Margin

The net profit margin shows a moderate upward movement from 22.02% in 2020 to 25.46% in 2023, followed by a more noticeable decline to 22.74% in 2024. While the margin remains higher than the initial year, the recent decrease could suggest rising costs or expenses outside of EBIT such as taxes, interest, or other factors impacting net profitability negatively after the peak year.