Critical Comparison: Cadence Design Systems (CDNS) and Progress Software (PRGS)

Cadence Design Systems (NASDAQ: CDNS) and Progress Software (NASDAQ:PRGS) are both computer and technology companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, analyst recommendations, institutional ownership, dividends, valuation and profitability.

Dividends

Progress Software pays an annual dividend of $0.56 per share and has a dividend yield of 1.2%. Cadence Design Systems does not pay a dividend. Progress Software pays out 72.7% of its earnings in the form of a dividend.

Profitability

This table compares Cadence Design Systems and Progress Software’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cadence Design Systems 10.50% 31.28% 12.92%
Progress Software 9.41% 21.25% 11.25%

Insider and Institutional Ownership

84.9% of Cadence Design Systems shares are held by institutional investors. Comparatively, 97.0% of Progress Software shares are held by institutional investors. 2.6% of Cadence Design Systems shares are held by insiders. Comparatively, 2.5% of Progress Software shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Volatility & Risk

Cadence Design Systems has a beta of 0.97, meaning that its share price is 3% less volatile than the S&P 500. Comparatively, Progress Software has a beta of 0.71, meaning that its share price is 29% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations for Cadence Design Systems and Progress Software, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cadence Design Systems 0 4 2 0 2.33
Progress Software 0 1 1 0 2.50

Cadence Design Systems presently has a consensus price target of $43.25, indicating a potential upside of 14.12%. Progress Software has a consensus price target of $39.50, indicating a potential downside of 16.53%. Given Cadence Design Systems’ higher probable upside, analysts clearly believe Cadence Design Systems is more favorable than Progress Software.

Earnings & Valuation

This table compares Cadence Design Systems and Progress Software’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cadence Design Systems $1.94 billion 5.51 $204.10 million $0.74 51.22
Progress Software $397.57 million 5.52 $37.41 million $0.77 61.46

Cadence Design Systems has higher revenue and earnings than Progress Software. Cadence Design Systems is trading at a lower price-to-earnings ratio than Progress Software, indicating that it is currently the more affordable of the two stocks.

Summary

Cadence Design Systems beats Progress Software on 10 of the 16 factors compared between the two stocks.

About Cadence Design Systems

Cadence Design Systems, Inc. provides solutions that enable its customers to design electronic products. The Company’s product categories include Functional Verification, Digital integrated circuits (IC) Design and Signoff, Custom IC Design and Verification, System Interconnect and Analysis, and intellectual property (IP). Functional verification products are used to verify that the circuitry or the software designed will perform as intended. Digital IC design offerings are used to create representations of a digital circuit or an IC that can be verified for correctness prior to implementation. Custom IC design and verification offerings are used to create schematic and physical representations of circuits down to the transistor level for analog and memory designs. System Interconnect and Analysis offerings are used to develop printed circuit boards and IC packages. Design IP offerings consist of functional blocks, which customers integrate into their ICs for the development process.

About Progress Software

Progress Software Corporation is engaged in application development. The Company operates through three segments: OpenEdge, Data Connectivity and Integration (DCI), and Application Development and Deployment (AppDev). The OpenEdge business segment provides the product enhancements and marketing support to its partner base. It is also focused on providing partners and direct end users with a path to develop and integrate cloud-based applications. Its solutions include Progress OpenEdge and Progress Corticon. The DCI segment is focused on its data assets, including the data integration components of its cloud offerings. Its solutions include Progress DataDirect Connect and Progress DataDirect Cloud. The AppDev business segment is focused on generating customers for its application development assets. Its solutions include Dev Tools, NativeScript, Dev Cloud, Telerik Platform, Test Studio, Sitefinity and Progress Rollbase. Its offerings span Web, mobile and data.

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