Smith Micro Software (NASDAQ:SMSI) versus Cadence Design Systems (NASDAQ:CDNS) Critical Analysis

Smith Micro Software (NASDAQ:SMSI) and Cadence Design Systems (NASDAQ:CDNS) are both computer and technology companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, earnings, valuation, profitability, risk and dividends.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Smith Micro Software	-166.15%	-45.16%	-37.14%
Cadence Design Systems	19.88%	29.65%	15.38%

Risk and Volatility

Smith Micro Software has a beta of 0.77, meaning that its stock price is 23% less volatile than the S&P 500. Comparatively, Cadence Design Systems has a beta of 0.99, meaning that its stock price is 1% less volatile than the S&P 500.

Institutional & Insider Ownership

20.8% of Smith Micro Software shares are held by institutional investors. Comparatively, 84.9% of Cadence Design Systems shares are held by institutional investors. 29.8% of Smith Micro Software shares are held by company insiders. Comparatively, 2.0% of Cadence Design Systems shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and price targets for Smith Micro Software and Cadence Design Systems, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Smith Micro Software	1	0	1	0	2.00
Cadence Design Systems	1	3	14	0	2.72

Smith Micro Software currently has a consensus target price of $5.00, indicating a potential upside of 548.00%. Cadence Design Systems has a consensus target price of $368.53, indicating a potential upside of 6.12%. Given Smith Micro Software’s higher probable upside, research analysts plainly believe Smith Micro Software is more favorable than Cadence Design Systems.

Earnings & Valuation

This table compares Smith Micro Software and Cadence Design Systems”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Smith Micro Software	$20.56 million	0.81	-$48.70 million	($1.85)	-0.42
Cadence Design Systems	$4.64 billion	20.39	$1.06 billion	$3.70	93.86

Cadence Design Systems has higher revenue and earnings than Smith Micro Software. Smith Micro Software 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 Smith Micro Software on 12 of the 14 factors compared between the two stocks.

About Smith Micro Software

Smith Micro Software, Inc. engages in the development and sale of software to enhance the mobile experience to wireless and cable service providers in the Americas, Europe, the Middle East, and Africa. The company offers SafePath Family, SafePath IoT, SafePath Home, and SafePath Premium product suite, which provides tools to protect digital lifestyles and manage connected devices inside and outside the home; and CommSuite, a messaging platform that helps mobile service provides deliver a next-generation voicemail experience to mobile subscribers, as well as enables multi-language voice-to-text (VTT) transcription messaging. It also offers ViewSpot, a retail display management platform that provides on-screen and interactive demos to wireless carriers and other smartphone retailers; and technical support and customer services. Smith Micro Software, Inc. was founded in 1982 and is headquartered in Pittsburgh, Pennsylvania.

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.