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What Can We Expect From Synopsys, Inc.'s (NASDAQ:SNPS) Earnings In The Year Ahead?

Simply Wall St

Looking at Synopsys, Inc.'s (NASDAQ:SNPS) recent earnings update on 31 July 2019, it seems that analyst forecasts are fairly bearish, with profits predicted to drop by 14% next year against the past 5-year average growth rate of 15%. Presently, with latest-twelve-month earnings at US$433m, we should see this fall to US$374m by 2020. Below is a brief commentary around Synopsys's earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for Synopsys

What can we expect from Synopsys in the longer term?

The view from 10 analysts over the next three years is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of SNPS's earnings growth over these next few years.

NasdaqGS:SNPS Past and Future Earnings, August 24th 2019

This results in an annual growth rate of 13% based on the most recent earnings level of US$433m to the final forecast of US$523m by 2022. EPS reaches $4.85 in the final year of forecast compared to the current $2.9 EPS today. Margins are currently sitting at 14%, approximately the same as previous years. With analysts forecasting revenue growth of 0.21024 and SNPS's net income growth expected to roughly track that, this company may add value for shareholders over time.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Synopsys, there are three important factors you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Synopsys worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Synopsys is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Synopsys? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.