What management does: Meanwhile, Synopsys continues to excel at improving its margins. At every level -- gross, operating, and net -- they've been improving for more than a year.
Margins 1/06 4/06 7/06 10/06 1/07 4/07
Gross 82.7% 82.7% 82.8% 83.0% 83.2% 83.4%
Operating (1.0%) 2.7% 5.7% 8.5% 9.7% 12.4%
Net (0.1%) 0.9% 0.0% 2.3% 4.1% 7.1%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says: One of the problems with analyzing a stock like Synopsys is the wide divergence of GAAP figures from their pro forma counterparts, which both analysts and management emphasize. Pro forma may have its uses, but personally, I get a little queasy at the thought of relying too much on results measured by a yardstick that management cut itself.
One solution -- and the one I practice myself -- is to avoid both GAAP and pro forma numbers and focus instead on free cash flow. And as I mentioned last quarter, by this yardstick, Synopsis is also improving: "It's now on track to both pass its stated goal of $275 million or more in annual cash from operations, and also beat my projected free cash flow estimate, by generating $236 million or so in cash profits." On Wednesday, we'll get the next installment of the cash flow information, and with any luck be able to up the projections a bit more, and find this stock approaching a fairer valuation than it's sported in the past.
Hopefully the "fairer valuation" is up, not down in its current share value.
Will more than one analyst start giving SNPS an upgrade (or a downgrade) before (not after) the earnings report day?