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Synopsys (SNPS) Reloads Stock-Buyback Authorization to $500M

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Synopsys Inc. SNPS last week announced that the company’s board of directors has replenished the company’s ongoing share-repurchase program to its limit of $500 million.

Notably, the stock-buyback program has been in effect since 2002 and the allotted capital has been refilled depending on fund availability. However, Synopsys is not obligated to buy back any specific number of shares and the program might be terminated depending on the company’s decision.

Synopsys completes its share-repurchase authorization through accelerated share repurchase (ASR) arrangements. So far in fiscal 2020, the company has entered into two different ASR arrangements, cumulative worth $350 million.

In fiscal 2020, Synopsys repurchased stock worth $242 million and had bought back approximately $398 million worth of common stocks in the first-half of fiscal 2021. During the second-quarter fiscal 2020 earnings call, the company had announced that it has returned approximately $2 billion since 2015, which is nearly 75% of its free cash flow.

Synopsys’ financial strength enables it to continue with the buyback program. As of Apr 30, 2021, the company’s cash balances were $1.46 billion. Its aggressive share-repurchase policies are anticipated to boost investor confidence. Synopsys’ strategy to return wealth to shareholders highlights its growth potential and stable liquidity position.

We believe, apart from strategic investments, continued focus on such shareholder-friendly initiatives will further boost the company’s shares. Remarkably, Synopsys has rallied 37.5% in the past year, outperforming the Zacks Computer – Software industry’s gain of 28.7%.

Zacks Investment Research
Zacks Investment Research

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Other companies that have a consistent record of returning value through share repurchases and dividend payments are Apple Inc. AAPL, Cisco CSCO and Microsoft MSFT.

Also, these initiatives likely raise the market value of the stock, apart from enhancing shareholder returns. Companies boost investor confidence through share repurchases and dividend payouts, persuading them to either buy or hold the scrip.

Currently, Synopsys carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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