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Synopsys, Inc. (NASDAQ:SNPS) Analysts Are Pretty Bullish On The Stock After Recent Results

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Simply Wall St
·4 min read
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It's been a good week for Synopsys, Inc. (NASDAQ:SNPS) shareholders, because the company has just released its latest annual results, and the shares gained 5.1% to US$237. Synopsys reported in line with analyst predictions, delivering revenues of US$3.7b and statutory earnings per share of US$4.27, suggesting the business is executing well and in line with its plan. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Synopsys

earnings-and-revenue-growth
earnings-and-revenue-growth

After the latest results, the 15 analysts covering Synopsys are now predicting revenues of US$4.03b in 2021. If met, this would reflect a meaningful 9.4% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to rise 4.0% to US$4.57. In the lead-up to this report, the analysts had been modelling revenues of US$3.98b and earnings per share (EPS) of US$4.63 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

The consensus price target rose 11% to US$254despite there being no meaningful change to earnings estimates. It could be that the analystsare reflecting the predictability of Synopsys' earnings by assigning a price premium. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Synopsys at US$290 per share, while the most bearish prices it at US$148. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Next year brings more of the same, according to the analysts, with revenue forecast to grow 9.4%, in line with its 10% annual growth over the past five years. Compare this with the wider industry (in aggregate), which analyst estimates suggest will see revenues grow 13% next year. So it's pretty clear that Synopsys is expected to grow slower than similar companies in the same industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Synopsys' revenues are expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that in mind, we wouldn't be too quick to come to a conclusion on Synopsys. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Synopsys analysts - going out to 2023, and you can see them free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.