Synopsys to Boost Shareholder Wealth with New ASR Agreement
Continuing with its efforts to enhance shareholder value, Synopsys Inc. SNPS last week entered into a fresh accelerated share repurchase agreement (ASR) with Wells Fargo Bank NA, just within a week of completing its earlier deal entered on Dec 6, 2016 with the same financial institution. This reflects the California-based company’s sound financial position and favorable prospects.
The new ASR agreement is also of the same value, i.e. $100 million. Per the agreement, Synopsys will initially receive approximately 1.12 million shares while the remaining shares will be received on or before May 17, 2017, depending on the completion of purchase. The number of shares to be repurchased will be calculated on the basis of Synopsys’ volume weighted average share price during the stated period, after adjusting for a discount.
The company’s newly announced ASR agreement boosts investors’ confidence in the stock, driving shares up 1.2% last Friday. Moreover, in the last one year, the stock has outperformed the Zacks categorized Computer-Software industry. Synopsys has returned 61% during the said time frame while the industry gained 27.4%.
Enhances Shareholder Value with Share Buybacks
According to the company, accelerated share repurchase arrangements are an integral element of its overall framework for enhancing investors’ worth. Earlier, apart from the Dec 6, 2016 agreement, the company had initiated an ASR program worth $125 million in May last year. In Dec 2015, it initiated a $200 million ASR program while in Dec 2014, it started a $180 million ASR program that was completed in the third quarter of fiscal 2015.
Apart from the ASR agreement, the company also repurchased its common stock from the open market. In Sep 2016, Synopsys approved an extension of its existing share repurchase authorization to make it worth $500 million again. The company repurchased stock worth $400 million in fiscal 2016.
Moreover, continuing with its strategy of returning cash to shareholders, the company bought $100 million of its common stock in the first quarter of fiscal 2017. As of Jan 31, 2017, Synopsys had nearly $335 million remaining under its normal share repurchase program at the end of first-quarter fiscal 2017.
Bottom Line
Synopsys’ financial strength allows it to continue with its buyback program. As of Jan 31, 2017, the company’s cash, cash equivalents and short-term investments were $966.3 million. The company’s aggressive share repurchase policies are expected to boost investors’ confidence. Synopsys’ strategy to return wealth to shareholders reflects its growth potential and stable liquidity position.
Other companies that have a consistent record of returning value through share repurchases and dividend payments are Apple Inc. AAPL, Electronic Arts Inc. EA and Accenture plc ACN.
We believe that apart from enhancing shareholders’ return, these initiatives also raise the market value of the stock. Through dividend payouts, companies bolster investors’ confidence, persuading them to either buy or hold the scrip. Looking ahead, Synopsys remains confident of its growth potential, thereby raising hopes for a further increase in shareholder value through dividend payouts and share buybacks.
Currently, Synopsys carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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