Synopsys Inc (SNPS) stock analysis

P/E above its 5-year median

Synopsys's P/E of 81.6 is above its own 5-year median of 58.9.

P/E above the industry

Synopsys's P/E of 81.6 is above the Computer Programming, Data Processing, and Other Computer Related Services median of 27.6.

EV/EBITDA below its 5-year median

Synopsys's EV/EBITDA of 36.3 is below its 5-year median of 47.2.

P/B below the industry

Synopsys's price-to-book of 2.84 is below the Computer Programming, Data Processing, and Other Computer Related Services median of 3.32.

Trading above fair value

The share price of $462.12 is above our fair value estimate of $306.13.

Margin of safety under 20%

The price is 51.0% above fair value, so there is no margin of safety.

Revenue growing 10%+ a year

Revenue grew 15.2% a year over the last three fiscal years.

EPS growing under 10% a year

Diluted EPS grew 8.5% a year over the last three fiscal years.

Earnings growth not accelerating

Net income grew -46.1% over the last twelve months, against a 5-year average of 14.9% a year.

Growing faster than the industry

Revenue grew 46.3% over the last twelve months; the Computer Programming, Data Processing, and Other Computer Related Services median is 9.6%.

Guidance raised

Synopsys raised its Fiscal Year Ending October 31, 2026 Revenue outlook on Aug 26, 2026.

Gross margin slipping

Gross margin was 72.4% over the last twelve months, against 79.1% a year earlier.

Return on equity under 15%

Return on equity was 3.7% over the last twelve months and averaged 18.2% over five years; we look for 15% on both.

Return on capital under 10%

Return on invested capital was 1.7%, below the 10% that usually covers the cost of capital.

Return on equity above the industry

Synopsys's return on equity of 3.7% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -1.2%.

Earnings grew over 5 years

Net income grew 14.9% a year on average over the last five fiscal years.

Net margin below its 5-year average

Net margin was 11.4% over the last twelve months, against a 5-year average of 23.7%.

Net margin above the industry

Synopsys's net margin of 11.4% is above the Computer Programming, Data Processing, and Other Computer Related Services median of -4.8%.

Low debt

Debt is 32.2% of shareholders' equity, under the 40% we consider low.

Debt rising against equity

Debt to equity rose from 2.6% five years ago to 32.2%.

Debt covered by cash flow

Operating cash flow over the last twelve months equals 29.3% of total debt.

Interest not well covered

Operating income covers interest expense 1.3 times; we look for at least 5.

Short-term assets cover short-term debts

Current assets are 1.34 times current liabilities.

Low bankruptcy risk

The Altman Z-score is 3.82; above 3 is the safe zone and below 1.8 the distress zone.

No dividend

Synopsys has not paid a dividend in the last twelve months.

Yield against Treasuries

No dividend.

Yield against the market

No dividend.

Dividend stability

No dividend.

Earnings cover

No dividend.

Cash-flow cover

No dividend.