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How much a stock's price changes over time is a significant driver for most investors. Not only can price performance impact your portfolio, but it can help you compare investment results across sectors and industries as well.
Another factor that can influence investors is FOMO, or the fear of missing out, especially with tech giants and popular consumer-facing stocks.
What if you'd invested in Synopsys (SNPS) ten years ago? It may not have been easy to hold on to SNPS for all that time, but if you did, how much would your investment be worth today?
Synopsys' Business In-Depth
With that in mind, let's take a look at Synopsys' main business drivers.
Synopsys is a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries. The company offers a full suite of products used in the logic synthesis and functional verification phases of chip design, including a broad array of reusable design building blocks. It also sells physical synthesis and physical design products as well as physical verification products.
The company’s products are used to design a chip, from concept to the point of delivery to the manufacturer for fabrication. Synopsis provides software and hardware, which are used to develop electronic systems that incorporate chips. Additionally, the company provides Intellectual Property (IP) used in semiconductor design and manufacturing to simplify the design process and accelerate time-to-market for its customers.
Synopsis reports revenues in three segments, namely Time-Based Products, Upfront Products and Maintenance and Service.
Time-Based Products (64% of fiscal 2020 revenues): Segment revenues are recognized as Technology Subscription License (TSL) revenues. Under this segment, the company recognizes revenues from fees over the period of the license or as and when the installments are paid by the customer, whichever is later.
Upfront Products (20%): These revenues are recognized as Term License revenues. Under this segment, the company recognizes revenues from term licenses in full after the completion of the shipment of the software, wherein at least 75% of the license fee is paid within a year of shipment, after fulfilling all other revenue recognition criteria.
Maintenance and Service (16%): Under this segment revenues come from maintenance fees that are generated over the maintenance period; along with revenues generated from professional service and training fees.
The company conducts its business across four geographic regions namely: The United States (48.1% of fiscal 2020 revenues), China(11.4%), Europe (10.5%) ,Korea(10.6%) and others (19.4%).
Synopsys’ competitors include EDA vendors like Cadence Design Systems Inc. and Mentor Graphics Corporation.
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Synopsys, if you bought shares a decade ago, you're likely feeling really good about your investment today.
A $1000 investment made in June 2011 would be worth $9,470.52, or an 847.05% gain, as of June 4, 2021, according to our calculations. Investors should note that this return excludes dividends but includes price increases.
The S&P 500 rose 222.49% and the price of gold increased 16.68% over the same time frame in comparison.
Going forward, analysts are expecting more upside for SNPS.
Synopsys’ second-quarter results gained from strong design wins owing to a robust product portfolio. Growth in work-from-home and e-learning trends induced by the coronavirus pandemic is driving demand for bandwidth. Moreover, strong traction for Synopsys’ Fusion Compiler product boosted the top line. Growing demand for advanced technology, design, IP and security solutions is also creating solid prospects. Moreover, rising impact of AI, 5G, IoT and big data is driving investments in new compute and ML architectures. Shares of the company have outperformed the industry over the past year. However, Synopsys is hurting from supply-chain disruptions stemming from the pandemic. The company is also witnessing stiff competition. Moreover, geopolitical challenges and uncertainties related to restrictions over trade with Huawei are other woes.
Shares have gained 5.53% over the past four weeks and there have been 5 higher earnings estimate revisions for fiscal 2021 compared to none lower. The consensus estimate has moved up as well.
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