Synopsys (SNPS) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
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Synopsys (SNPS) closed at $301.68 in the latest trading session, marking a +1.75% move from the prior day. The stock outpaced the S&P 500's daily gain of 1.19%. Meanwhile, the Dow gained 1.34%, and the Nasdaq, a tech-heavy index, lost 0.18%.

Prior to today's trading, shares of the maker of software used to test and develop chips had lost 2.24% over the past month. This has was narrower than the Computer and Technology sector's loss of 2.47% and lagged the S&P 500's loss of 0.84% in that time.

Synopsys will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $1.84, up 1.1% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $1.28 billion, up 11.01% from the year-ago period.

SNPS's full-year Zacks Consensus Estimates are calling for earnings of $8.85 per share and revenue of $5.08 billion. These results would represent year-over-year changes of +29.39% and +20.71%, respectively.

Investors should also note any recent changes to analyst estimates for Synopsys. These revisions help to show the ever-changing nature of near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. Synopsys is holding a Zacks Rank of #4 (Sell) right now.

In terms of valuation, Synopsys is currently trading at a Forward P/E ratio of 33.51. This represents a premium compared to its industry's average Forward P/E of 23.49.

Meanwhile, SNPS's PEG ratio is currently 2.07. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Computer - Software industry currently had an average PEG ratio of 2.05 as of yesterday's close.

The Computer - Software industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 78, which puts it in the top 31% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow SNPS in the coming trading sessions, be sure to utilize Zacks.com.


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