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

Zacks Equity Research

Synopsys (SNPS) closed the most recent trading day at $138.89, moving +0.78% from the previous trading session. The stock outpaced the S&P 500's daily gain of 0.16%. Elsewhere, the Dow 0%, while the tech-heavy Nasdaq added 0.26%.

Coming into today, shares of the maker of software used to test and develop chips had lost 0.75% in the past month. In that same time, the Computer and Technology sector gained 4.79%, while the S&P 500 gained 4.12%.

Investors will be hoping for strength from SNPS as it approaches its next earnings release. In that report, analysts expect SNPS to post earnings of $1.13 per share. This would mark year-over-year growth of 44.87%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $849.55 million, up 6.85% from the year-ago period.

Any recent changes to analyst estimates for SNPS should also be noted by investors. These recent revisions tend to reflect the evolving nature of short-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

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. Over the past month, the Zacks Consensus EPS estimate remained stagnant. SNPS is currently a Zacks Rank #3 (Hold).

In terms of valuation, SNPS is currently trading at a Forward P/E ratio of 27.61. For comparison, its industry has an average Forward P/E of 29.77, which means SNPS is trading at a discount to the group.

Meanwhile, SNPS's PEG ratio is currently 2.3. 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. Computer - Software stocks are, on average, holding a PEG ratio of 2.28 based on yesterday's closing prices.

The Computer - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 41, putting it in the top 17% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.

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