Cadence Design Systems (NASDAQ:CDNS) versus AvidXchange (NASDAQ:AVDX) Critical Review

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

Insider & Institutional Ownership

84.9% of Cadence Design Systems shares are held by institutional investors. Comparatively, 80.6% of AvidXchange shares are held by institutional investors. 2.0% of Cadence Design Systems shares are held by insiders. Comparatively, 10.3% of AvidXchange shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Cadence Design Systems	25.68%	32.44%	19.18%
AvidXchange	-8.10%	-1.75%	-0.52%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Cadence Design Systems and AvidXchange, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cadence Design Systems	0	2	7	0	2.78
AvidXchange	1	5	5	0	2.36

Cadence Design Systems presently has a consensus price target of $332.78, suggesting a potential upside of 8.13%. AvidXchange has a consensus price target of $12.86, suggesting a potential upside of 6.66%. Given Cadence Design Systems’ stronger consensus rating and higher possible upside, equities analysts plainly believe Cadence Design Systems is more favorable than AvidXchange.

Earnings and Valuation

This table compares Cadence Design Systems and AvidXchange’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cadence Design Systems	$4.09 billion	20.50	$1.04 billion	$3.84	80.14
AvidXchange	$380.72 million	6.54	-$47.33 million	($0.15)	-80.39

Cadence Design Systems has higher revenue and earnings than AvidXchange. AvidXchange 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.

Volatility and Risk

Cadence Design Systems has a beta of 1.04, indicating that its share price is 4% more volatile than the S&P 500. Comparatively, AvidXchange has a beta of 1, indicating that its share price has a similar volatility profile to the S&P 500.

Summary

Cadence Design Systems beats AvidXchange on 13 of the 14 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 AvidXchange

AvidXchange Holdings, Inc. provides accounts payable (AP) automation software and payment solutions for middle market businesses and their suppliers in North America. The company offers AP automation software, a SaaS-based solution that automates and digitizes capture, review, approval, and payment of invoices for buyers; the AvidPay network that connects two-sided payments with buyers and suppliers; and the AvidXchange Supplier Hub, which provides supplier insights to cash flow, tools for in-network invoices and payments, and early payment feature. Its platform offers electronic invoice capture, workflow routing, and automated payments solutions. The company serves real estate, community association management, construction, financial services, healthcare facilities, social services, education, hospitality, and media sectors through direct salesforces; strategic channel partnerships; and software and technology business partners. AvidXchange Holdings, Inc. was incorporated in 2000 and is headquartered in Charlotte, North Carolina.