Today we're going to take a look at the well-established Synopsys, Inc. (NASDAQ:SNPS). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Synopsys’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Synopsys still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.68% above my intrinsic value, which means if you buy Synopsys today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is $120.67, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Synopsys’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Synopsys?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 1.0% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Synopsys, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in SNPS’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on SNPS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Synopsys. You can find everything you need to know about Synopsys in the latest infographic research report. If you are no longer interested in Synopsys, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.