Financial Survey: Cadence Design Systems (NASDAQ:CDNS) and SAP (NYSE:SAP)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Cadence Design Systems	19.88%	29.65%	15.38%
SAP	18.26%	14.84%	9.01%

Institutional & Insider Ownership

84.9% of Cadence Design Systems shares are owned by institutional investors. 2.0% of Cadence Design Systems shares are owned by insiders. Comparatively, 7.4% of SAP shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Risk and Volatility

Cadence Design Systems has a beta of 0.99, suggesting that its stock price is 1% less volatile than the S&P 500. Comparatively, SAP has a beta of 1.28, suggesting that its stock price is 28% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Cadence Design Systems and SAP, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cadence Design Systems	1	3	14	0	2.72
SAP	0	1	13	1	3.00

Cadence Design Systems presently has a consensus target price of $368.53, suggesting a potential upside of 6.12%. SAP has a consensus target price of $281.67, suggesting a potential upside of 4.14%. Given Cadence Design Systems’ higher probable upside, research analysts plainly believe Cadence Design Systems is more favorable than SAP.

Valuation & Earnings

This table compares Cadence Design Systems and SAP”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cadence Design Systems	$4.64 billion	20.39	$1.06 billion	$3.70	93.86
SAP	$36.99 billion	8.98	$3.38 billion	$6.04	44.78

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

Summary

Cadence Design Systems beats SAP on 8 of the 15 factors compared between the two stocks.

About Cadence Design Systems

Cadence Design Systems, Inc. provides software, hardware, services, and reusable integrated circuit (IC) design blocks worldwide. The company offers functional verification services, including emulation and prototyping hardware. Its functional verification offering consists of JasperGold, a formal verification platform; Xcelium, a parallel logic simulation platform; Palladium, an enterprise emulation platform; and Protium, a prototyping platform for chip verification. The company also provides digital IC design and sign off products, including Genus synthesis and Joules RTL power solutions, as well as Modus DFT software solution to reduce systems-on-chip design-for-test time; physical implementation tools, such as place and route, optimization, and multiple patterning preparation; and Innovus implementation system, a physical implementation system. In addition, it offers custom IC design and simulation products to create schematic and physical representations of circuits down to the transistor level for analog, mixed-signal, custom digital, memory, and radio frequency designs; and system design and analysis products to develop printed circuit boards and IC packages, as well as to analyze electromagnetic, electro-thermal, and other multi-physics effects. Further, the company provides intellectual property (IP) products comprising pre-verified and customizable functional blocks to integrate into customer's ICs; and verification IP with memory models to emulate and model the expected behavior and interaction of standard industry system interface protocols. Additionally, it offers services related to methodology, education, and hosted design solutions, as well as technical support and maintenance services. The company serves consumer, hyperscale computing, 5G communications, mobile, automotive, aerospace and defense, industrial, and life science industries. Cadence Design Systems, Inc. was incorporated in 1987 and is headquartered in San Jose, California.

About SAP

SAP SE, together with its subsidiaries, provides applications, technology, and services worldwide. It offers SAP S/4HANA that provides software capabilities for finance, risk and project management, procurement, manufacturing, supply chain and asset management, and research and development; SAP SuccessFactors solutions for human resources, including HR and payroll, talent and employee experience management, and people and workforce analytics; and spend management solutions that covers direct and indirect spend, travel and expense, and external workforce management. The company also provides SAP customer experience solutions; SAP Business Technology platform that enables customers and partners to build, integrate, and automate applications; and SAP Business Network, a business-to-business collaboration platform that helps digitalize key business processes across the supply chain and enables communication between trading partners. In addition, it offers SAP Signavio to help customers to discover, analyze, and understand their business process operations; SAP's industry cloud solutions that provides modular solutions addressing industry-specific functions; Taulia solutions for working capital management to help enable customers mitigate the effects of inflation by providing visibility into working capital and access to liquidity; and sustainability solutions and services. SAP SE was founded in 1972 and is headquartered in Walldorf, Germany.