Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Cadence Design Systems, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 13.7% to 15.4% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 51, DPO 140, DIO 143). At a 9.2% WACC with mid-year discounting, the terminal value (90% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 27.7x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $227.47 per share, suggesting CDNS is overvalued by 19.3% at the current price of $281.88.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 1,748 | 1,965 | 2,142 | 2,365 | 2,729 | 2,797 |
| (−) Net Interest | 72 | 80 | 88 | 97 | 112 | 114 |
| (+) D&A | 116 | 136 | 149 | 170 | 187 | 191 |
| EBITDA | 1,935 | 2,181 | 2,378 | 2,632 | 3,027 | 3,103 |
| (−) Tax | 344 | 387 | 422 | 466 | 538 | — |
| (−) CapEx | 168 | 189 | 206 | 228 | 263 | — |
| (−) ΔWC | 456 | 105 | 86 | 108 | 176 | — |
| Free Cash Flow (FCF) | 966 | 1,499 | 1,664 | 1,829 | 2,050 | — |
| Peers' EBITDA Multiple | 27.7x | |||||
| Terminal Value | 85,957 | |||||
| WACC / Discount Rate | 9.20% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 925 | 1,314 | 1,335 | 1,344 | 1,380 | 55,358 |
| Enterprise Value | 61,656 | |||||
| Projection Period | 6,298 | 10.2% | ||||
| Terminal Value | 55,358 | 89.8% | ||||
| (−) Current Net Debt | (521) | |||||
| Equity Value | 62,177 | |||||
| (÷) Outstanding Shares | 273M | |||||
| Fair Price | $227 | -19.3% | ||||
| WACC \ EV/EBITDA Exit Multiple | 23.7x | 25.7x | 27.7x | 29.7x | 31.7x |
|---|---|---|---|---|---|
| 7.2% | $216 | $232 | $248 | $264 | $280 |
| 8.2% | $207 | $222 | $238 | $253 | $268 |
| 9.2% | $198 | $213 | $227 | $242 | $257 |
| 10.2% | $190 | $204 | $218 | $232 | $246 |
| 11.2% | $182 | $195 | $209 | $222 | $236 |
Current price: $281.88. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.