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Synopsys (SNPS) Gains But Lags Market: What You Should Know

Zacks Equity Research

In the latest trading session, Synopsys (SNPS) closed at $126.23, marking a +1.17% move from the previous day. The stock lagged the S&P 500's daily gain of 1.3%. Elsewhere, the Dow gained 1.21%, while the tech-heavy Nasdaq added 1.39%.

Coming into today, shares of the maker of software used to test and develop chips had lost 7.99% in the past month. In that same time, the Computer and Technology sector lost 4.48%, while the S&P 500 lost 4.84%.

Wall Street will be looking for positivity from SNPS as it approaches its next earnings report date. The company is expected to report EPS of $1.10, up 15.79% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $829.52 million, up 6.39% from the year-ago period.

SNPS's full-year Zacks Consensus Estimates are calling for earnings of $4.36 per share and revenue of $3.33 billion. These results would represent year-over-year changes of +11.51% and +6.63%, respectively.

It is also important to note the recent changes to analyst estimates for SNPS. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. SNPS currently has a Zacks Rank of #4 (Sell).

Investors should also note SNPS's current valuation metrics, including its Forward P/E ratio of 28.63. Its industry sports an average Forward P/E of 28.76, so we one might conclude that SNPS is trading at a discount comparatively.

Investors should also note that SNPS has a PEG ratio of 2.6 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. Computer - Software stocks are, on average, holding a PEG ratio of 2.03 based on yesterday's closing prices.

The Computer - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 64, which puts it in the top 25% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.

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