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Synopsys, Inc (SNPS) closed down almost 2.4% on Wednesday, ending the day at $283.76 on just over 925,000 trades. Though this marks the second consecutive day Synopsys has traded down, its stock is still doing well compared to its 22-day price average of $271.58. And while the year is still young, the company has already clawed up 11.4% YTD.
This Mountain View, California-based electronic design automation company has made a name for itself during the pandemic. While its stock took a brief tumble last March – really, who didn’t? – it was less than two months before it topped pre-pandemic highs. After that, it was little else but gains and good news as long-term work-from-home arrangements became reality for millions.
And for many of these companies and individuals working from home, success in quarantine (and the grueling months after) was dictated not by business strategy, but by the products or services provided.
Here, Synopsis is in the hot seat in the best of ways: The company’s primary output is software to design semiconductors, or the chips that power… well, basically everything, now. From artificial intelligence to self-driving cars to smart watches, Synopsys has its chips in a plethora of pies – and that, plus a savvy pandemic plan, was key to the last year’s success.
Now that we’ve taken stock of Synopsys as a whole, let’s take a look at the reason it’s currently trending: the release of their first quarter 2021 financial results.
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A Synopsys Synopsis: Q1/2021
Synopsys released their Q1/21 results on Wednesday, 17 February, with a statement from their chairman and co-CEO, Aart de Geus: “The first quarter was a very good start to fiscal year 2021… we delivered financial results at or above guidance targets, initiated a $250 million stock repurchase, and are reaffirming our outlook for the year… new innovations in EDA, state-of-the-art IP blocks, and leading software security products and services [are] generating high demand and excellent growth.”
In other words, the company is doing well because it’s doing what it does well in a time where its products are needed. And because of that, the market – both the stock market and its consumer base – have rewarded them handsomely.
In Q1 alone, Synopsys saw a revenue of $970.3 million against a YOY revenue of $834.3 million. This yielded a GAAP net income of $162.3 million all-told (with a non-GAAP net income of $239.5 million). Going forward, Synopsys expects to earn a grand total of $4.025 billion in 2021.
A Year of Boons
Synopsys’ excellent first quarter caps off a year of fiscal fortitude in a year of financial hemorrhaging and uncertainty in much of the world.
Their revenue experienced 3.7% growth to $3.685 billion, while their three-year revenue grew by 22.4% from $3.12 billion in the last 36 months. As a result of increased demand, their operating income saw a 7.9% boost to $656 million (up 77% from $399 million three years ago).
Also in the last fiscal year, their EPS saw growth of 8.3%, bringing per-share earnings to $4.27, compared to $2.82 three years ago.
Currently, the company is trading with a forward 12-month P/E of 43.96.
What Does Q.ai’s AI Have to Say?
A company in good financial standing is usually a company worth your investment dollars – but not always. After all, it’s what’s behind the curtain that really matters. And so, we’ve consulted our in-house AI for a better look at Synopsys.
And the results are in: Synopsys earned an above-average report overall, with A’s in Growth and Quality Value, a B in Low Volatility Momentum, and a C in Technicals. With a strong performance behind it and a solid outlook toward the future, Synopsys has earned its Top Buy rating from Q.ai.
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