10 Best Design Engineering Software for January 2026
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Market Overview & Selection Criteria
The design engineering software sector within technology continues to show resilience amid broader market volatility, driven by demand for digital transformation tools in engineering, CAD, and creative workflows. ValueSense analysis highlights companies with strong intrinsic value potential, focusing on high quality ratings, robust revenue growth, superior gross margins (often above 70%), and attractive free cash flow generation. These top stock picks were selected using ValueSense's proprietary screener criteria: Quality rating above 5.0, significant upside to intrinsic value, and exposure to design-engineering software themes like EDA, CAD, and collaborative platforms. This watchlist emphasizes undervalued stocks in a niche poised for AI-enhanced growth, offering educational insights for retail investors building diversified portfolios.
Featured Stock Analysis
Stock #1: Adobe Inc. (ADBE)
| Metric | Value |
|---|---|
| Market Cap | $139.8B |
| Quality Rating | 7.7 |
| Intrinsic Value | $563.0 |
| 1Y Return | -24.4% |
| Revenue | $23.8B |
| Free Cash Flow | $9,852.0M |
| Revenue Growth | 10.5% |
| FCF margin | 41.4% |
| Gross margin | 89.0% |
| ROIC | 40.8% |
| Total Debt to Equity | 57.2% |
Investment Thesis
Adobe Inc. (ADBE) stands out with a Quality rating of 7.7 and an intrinsic value of $563.0, suggesting substantial undervaluation in the design software space. The company reports massive scale with $23.8B in revenue and exceptional $9,852.0M free cash flow, underpinned by 10.5% revenue growth, a stellar 41.4% FCF margin, 89.0% gross margin, and 40.8% ROIC. Despite a -24.4% 1Y return and $139.8B market cap, these metrics indicate a high-quality business generating strong profitability in creative and document software, positioning it as a leader for long-term value analysis in design engineering.
Key Catalysts
- Dominant gross margins at 89.0% support sustained profitability in subscription models
- Industry-leading 40.8% ROIC reflects efficient capital use for growth
- 10.5% revenue growth with $9.8B FCF provides firepower for AI integrations and acquisitions
Risk Factors
- 57.2% total debt to equity requires monitoring leverage in rising rate environments
- Recent -24.4% 1Y return signals short-term market pressures on tech valuations
Stock #2: Cadence Design Systems, Inc. (CDNS)
| Metric | Value |
|---|---|
| Market Cap | $83.5B |
| Quality Rating | 7.5 |
| Intrinsic Value | $152.3 |
| 1Y Return | 4.3% |
| Revenue | $5,212.6M |
| Free Cash Flow | $1,478.6M |
| Revenue Growth | 19.7% |
| FCF margin | 28.4% |
| Gross margin | 90.7% |
| ROIC | 26.4% |
| Total Debt to Equity | 37.5% |
Investment Thesis
Cadence Design Systems (CDNS) earns a solid Quality rating of 7.5, with intrinsic value at $152.3 amid $83.5B market cap. Key metrics include $5,212.6M revenue, $1,478.6M free cash flow, 19.7% revenue growth, 28.4% FCF margin, 90.7% gross margin, and 26.4% ROIC, alongside a modest 4.3% 1Y return. This profile highlights CDNS as a powerhouse in electronic design automation (EDA), delivering consistent growth and margins that make it a compelling pick for design engineering stock analysis.
Key Catalysts
- Rapid 19.7% revenue growth driven by chip design demand
- 90.7% gross margin enables reinvestment in R&D for AI tools
- 26.4% ROIC and positive 4.3% 1Y return show operational strength
Risk Factors
- 37.5% total debt to equity could amplify volatility in sector downturns
- Dependence on semiconductor cycles poses cyclical risks
Stock #3: Synopsys, Inc. (SNPS)
| Metric | Value |
|---|---|
| Market Cap | $75.6B |
| Quality Rating | 6.2 |
| Intrinsic Value | $265.6 |
| 1Y Return | -0.5% |
| Revenue | $7,053.9M |
| Free Cash Flow | $1,349.2M |
| Revenue Growth | 12.6% |
| FCF margin | 19.1% |
| Gross margin | 73.1% |
| ROIC | 2.0% |
| Total Debt to Equity | 50.5% |
Investment Thesis
Synopsys (SNPS) features a Quality rating of 6.2 and intrinsic value of $265.6, with $75.6B market cap and $7,053.9M revenue. It generates $1,349.2M free cash flow, 12.6% revenue growth, 19.1% FCF margin, 73.1% gross margin, but lower 2.0% ROIC and -0.5% 1Y return. These figures position SNPS as a key EDA player with undervaluation potential, though efficiency improvements could enhance its appeal in stock watchlist evaluations.
Key Catalysts
- 12.6% revenue growth supports expansion in semiconductor software
- Solid 73.1% gross margin maintains competitiveness
- High intrinsic value upside for patient value investors
Risk Factors
- Low 2.0% ROIC indicates capital efficiency challenges
- 50.5% total debt to equity adds financial risk
Stock #4: Autodesk, Inc. (ADSK)
| Metric | Value |
|---|---|
| Market Cap | $60.9B |
| Quality Rating | 7.0 |
| Intrinsic Value | $190.5 |
| 1Y Return | -2.2% |
| Revenue | $6,882.0M |
| Free Cash Flow | $2,115.0M |
| Revenue Growth | 15.5% |
| FCF margin | 30.7% |
| Gross margin | 91.3% |
| ROIC | 21.3% |
| Total Debt to Equity | 101.2% |
Investment Thesis
Autodesk (ADSK) scores a Quality rating of 7.0, intrinsic value $190.5, and $60.9B market cap. Metrics show $6,882.0M revenue, $2,115.0M free cash flow, 15.5% revenue growth, 30.7% FCF margin, 91.3% gross margin, 21.3% ROIC, despite -2.2% 1Y return and elevated 101.2% debt to equity. ADSK's CAD leadership makes it a strong contender for undervalued stocks in engineering design.
Key Catalysts
- 91.3% gross margin fuels innovation in cloud-based design tools
- 15.5% revenue growth and 21.3% ROIC drive profitability
- $2.1B FCF supports subscription transitions
Risk Factors
- High 101.2% total debt to equity heightens balance sheet concerns
- -2.2% 1Y return reflects transition risks
Stock #5: PTC Inc. (PTC)
| Metric | Value |
|---|---|
| Market Cap | $20.3B |
| Quality Rating | 7.8 |
| Intrinsic Value | $148.4 |
| 1Y Return | -7.1% |
| Revenue | $2,739.2M |
| Free Cash Flow | $856.7M |
| Revenue Growth | 19.2% |
| FCF margin | 31.3% |
| Gross margin | 83.8% |
| ROIC | 24.7% |
| Total Debt to Equity | 35.7% |
Investment Thesis
PTC Inc. leads with the highest Quality rating of 7.8 and intrinsic value $148.4 at $20.3B market cap. It boasts $2,739.2M revenue, $856.7M free cash flow, 19.2% revenue growth, 31.3% FCF margin, 83.8% gross margin, 24.7% ROIC, and -7.1% 1Y return with low 35.7% debt to equity. PTC's IoT and CAD focus offers balanced growth for investment opportunities analysis.
Key Catalysts
- Top-tier 7.8 quality rating and 24.7% ROIC
- 19.2% revenue growth with 31.3% FCF margin
- Conservative 35.7% debt supports stability
Risk Factors
- -7.1% 1Y return amid market rotations
- Competition in industrial software
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Stock #6: Circle Internet Group (CRCL)
| Metric | Value |
|---|---|
| Market Cap | $19.6B |
| Quality Rating | 5.5 |
| Intrinsic Value | $26.6 |
| 1Y Return | 169.3% |
| Revenue | $2,341.5M |
| Free Cash Flow | $361.3M |
| Revenue Growth | N/A |
| FCF margin | 15.4% |
| Gross margin | 5.4% |
| ROIC | N/A |
| Total Debt to Equity | N/A |
Investment Thesis
Circle Internet Group (CRCL) has a Quality rating of 5.5, intrinsic value $26.6, and $19.6B market cap. With $2,341.5M revenue, $361.3M free cash flow, 15.4% FCF margin, low 5.4% gross margin, and explosive 169.3% 1Y return (N/A revenue growth/ROIC/debt), it represents high-momentum plays in internet design tools for educational review.
Key Catalysts
- Massive 169.3% 1Y return signals momentum
- $361.3M FCF despite low margins
- Growth potential in digital platforms
Risk Factors
- Low 5.4% gross margin indicates scalability issues
- N/A metrics on key growth/ROIC/debt raise transparency concerns
Stock #7: Unity Software Inc. (U)
| Metric | Value |
|---|---|
| Market Cap | $19.0B |
| Quality Rating | 5.7 |
| Intrinsic Value | $28.6 |
| 1Y Return | 80.5% |
| Revenue | $1,803.7M |
| Free Cash Flow | $391.0M |
| Revenue Growth | (8.2%) |
| FCF margin | 21.7% |
| Gross margin | 74.3% |
| ROIC | (11.0%) |
| Total Debt to Equity | 64.7% |
Investment Thesis
Unity Software (U) rates 5.7 quality, intrinsic value $28.6, $19.0B market cap, $1,803.7M revenue, $391.0M free cash flow, 8.2% revenue growth, 21.7% FCF margin, 74.3% gross margin, 11.0% ROIC, and strong 80.5% 1Y return with 64.7% debt. Its gaming/engine software warrants scrutiny for recovery potential.
Key Catalysts
- 80.5% 1Y return despite growth dip
- 74.3% gross margin in creator economy
- 21.7% FCF margin turnaround
Risk Factors
- Negative 8.2% revenue growth and 11.0% ROIC
- 64.7% debt in volatile sector
Stock #8: Figma, Inc. (FIG)
| Metric | Value |
|---|---|
| Market Cap | $18.4B |
| Quality Rating | 5.3 |
| Intrinsic Value | $10.3 |
| 1Y Return | -67.4% |
| Revenue | $969.0M |
| Free Cash Flow | $216.8M |
| Revenue Growth | 82.1% |
| FCF margin | 22.4% |
| Gross margin | 84.8% |
| ROIC | N/A |
| Total Debt to Equity | N/A |
Investment Thesis
Figma (FIG) shows 5.3 Quality rating, intrinsic value $10.3, $18.4B market cap, $969.0M revenue, $216.8M free cash flow, 82.1% revenue growth, 22.4% FCF margin, 84.8% gross margin (N/A ROIC/debt), but -67.4% 1Y return. High growth in collaborative design tools merits analysis.
Key Catalysts
- Explosive 82.1% revenue growth
- 84.8% gross margin and 22.4% FCF
- Collaborative platform adoption
Risk Factors
- Steep -67.4% 1Y return volatility
- N/A ROIC/debt data gaps
Stock #9: Bentley Systems, Incorporated (BSY)
| Metric | Value |
|---|---|
| Market Cap | $12.0B |
| Quality Rating | 6.5 |
| Intrinsic Value | $31.3 |
| 1Y Return | -18.0% |
| Revenue | $1,460.0M |
| Free Cash Flow | $460.1M |
| Revenue Growth | 11.1% |
| FCF margin | 31.5% |
| Gross margin | 81.2% |
| ROIC | 11.2% |
| Total Debt to Equity | 107.4% |
Investment Thesis
Bentley Systems (BSY) has 6.5 Quality rating, intrinsic value $31.3, $12.0B market cap, $1,460.0M revenue, $460.1M free cash flow, 11.1% growth, 31.5% FCF margin, 81.2% gross margin, 11.2% ROIC, -18.0% 1Y return, high 107.4% debt. Infrastructure software strength noted.
Key Catalysts
- 81.2% gross margin and 31.5% FCF
- 11.1% revenue growth in infra digitalization
- 11.2% ROIC stability
Risk Factors
- -18.0% 1Y return and 107.4% debt load
- Project-based revenue cyclicality
Stock #10: PDF Solutions, Inc. (PDFS)
| Metric | Value |
|---|---|
| Market Cap | $1,148.5M |
| Quality Rating | 6.2 |
| Intrinsic Value | $34.2 |
| 1Y Return | 8.2% |
| Revenue | $206.7M |
| Free Cash Flow | ($20.4M) |
| Revenue Growth | 21.2% |
| FCF margin | (9.9%) |
| Gross margin | 71.2% |
| ROIC | 2.0% |
| Total Debt to Equity | 3.2% |
Investment Thesis
PDF Solutions (PDFS) rates 6.2 quality, intrinsic value $34.2, small $1,148.5M market cap, $206.7M revenue, negative $20.4M free cash flow, 21.2% growth, 9.9% FCF margin, 71.2% gross margin, 2.0% ROIC, 8.2% 1Y return, low 3.2% debt. Niche analytics tools for semis.
Key Catalysts
- Strong 21.2% revenue growth
- Low 3.2% debt and 8.2% 1Y return
- 71.2% gross margin potential
Risk Factors
- Negative $20.4M FCF and 9.9% margin
- Low 2.0% ROIC in small cap
Portfolio Diversification Insights
These 10 best stocks cluster in design engineering software, with leaders like ADBE, CDNS, and PTC (quality 7.0+) offering stability via high ROIC (20-40%) and margins (80-90%), while growth plays like FIG (82.1% growth) and CRCL (169% return) add upside. Allocate 40% to mega-caps (ADBE, CDNS), 30% mid-caps (PTC, BSY), 30% high-growth/small (U, PDFS) for sector balance. Cross-correlations low due to sub-niches (EDA vs. CAD vs. creative), reducing tech concentration risk while capturing value stocks themes.
Market Timing & Entry Strategies
Consider entry on dips below intrinsic value thresholds (e.g., ADBE under $563), using ValueSense charting for ROIC trends and revenue acceleration. Monitor Q4 earnings for growth beats, especially PTC/CDNS (19%+ growth). Dollar-cost average into high-quality names (PTC 7.8 rating) during volatility; scale into momentum like CRCL post-pullbacks. Track sector catalysts like AI design tools via ValueSense screeners for optimal positioning.
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FAQ Section
How were these stocks selected?
These design engineering software stock picks were filtered via ValueSense criteria emphasizing Quality rating >5.0, high intrinsic value upside, strong margins/ROIC, and sector relevance for comprehensive educational analysis.
What's the best stock from this list?
PTC tops with 7.8 Quality rating, 24.7% ROIC, 19.2% growth—ideal for quality-focused watchlists, though all offer unique investment ideas based on risk tolerance.
Should I buy all these stocks or diversify?
Diversify across sub-sectors (EDA like CDNS, CAD like ADSK) to balance growth (FIG 82%) and stability (ADBE 89% margins); avoid concentration per ValueSense portfolio tools.
What are the biggest risks with these picks?
Key concerns include high debt (ADSK 101%, BSY 107%), negative growth/FCF (U, PDFS), and sector cyclicality tied to semis—use ValueSense health ratings for monitoring.
When is the best time to invest in these stocks?
Target entries when prices lag intrinsic value (e.g., SNPS $265+), post-earnings beats, or sector rotations; ValueSense backtesting aids timing undervalued stocks to buy.