Bank of America Corporation (BAC) vs Cadence Design Systems, Inc. (CDNS): Which Is the Better Buy in 2026?
As of 2026-06-21, BAC is undervalued at $56, with a DCF intrinsic value of $133 and a margin of safety of 58%. CDNS is overvalued at $387, with an intrinsic value of $165 and a margin of safety of -135%. Of the two, BAC has the wider margin of safety.
Rewards
- ★Bank of America Corporation scores 100/100 on the Economic Moat Score (Wide Moat), with revenue predictability as the strongest competitive dimension.
- ★Cadence Design Systems, Inc. has maintained ROIC above 10% for 4 consecutive years, suggesting solid business economics.
- ★Gross margin of 86.1% indicates strong pricing power — typical of businesses with significant intellectual property or brand strength.
- ★Cadence Design Systems, Inc. scores 91/100 on the Economic Moat Score (Wide Moat), with revenue predictability as the strongest competitive dimension.
Risks
- ⚠Gross margin of 0.0% is low, suggesting a competitive or commodity-like market with limited pricing power.
- ⚠Altman Z-Score of 0.22 places the company in the distress zone — financial patterns resemble those of companies that experienced bankruptcy.
- ⚠FCF yield of 1.4% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠Trailing P/E of 90.1x is 31% above the historical average of 68.9x — the stock trades at a premium to its own history.
- ⚠PEG ratio of 3.68 indicates the stock is expensive relative to its expected growth — the market may be pricing in more growth than analysts project.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →Requires positive FCF to compute implied growth rate.
What growth rate is the market pricing in at $387?
The market implies +28.4% Owner Earnings growth, above historical trends.
Standard FCF implies a demanding +25.3%, reflecting heavy growth investment.
Economic Moat Score
Learn more →Wide moat driven primarily by revenue predictability. Reinvestment Efficiency is the area most vulnerable to competitive pressure.
Wide moat with strength across all dimensions. Revenue Predictability is the standout factor.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is optimistic — be cautious and ensure you have a margin of safety"
"Market is pricing this stock without strong emotion in either direction"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: BAC vs CDNS
Is Bank of America Corporation or Cadence Design Systems, Inc. more undervalued in 2026?▼
Based on our discounted cash flow model, BAC trades at a 57.9% margin of safety (intrinsic value $133 vs. price $56), compared to CDNS's -135.1% margin of safety (intrinsic $165 vs. $387).
Which stock has a wider economic moat, Bank of America Corporation or Cadence Design Systems, Inc.?▼
BAC scores 100/100 (Wide moat), while CDNS scores 91/100 (Wide moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is Bank of America Corporation in financial distress?▼
BAC's Altman Z-Score of 0.2 places it in the Distress zone, signaling elevated bankruptcy risk. CDNS scores 13.3 (Safe zone). The Altman Z-Score is a five-factor model that predicts insolvency within two years; scores below 1.81 indicate significant distress.
Which stock has higher return on invested capital, Bank of America Corporation or Cadence Design Systems, Inc.?▼
CDNS earns 13.4% ROIC versus BAC's 3.9%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.