In a world increasingly driven by technology, Synopsys, Inc. empowers innovation by providing essential electronic design automation software that shapes the future of industries from automotive to healthcare. Renowned for its cutting-edge Fusion Design Platform and Verification Continuum Platform, Synopsys sets the standard for quality and efficiency in chip design and verification. As we evaluate its current market position, the key question arises: do Synopsys’s robust fundamentals still support its impressive market valuation and growth trajectory?
Table of contents
Company Description
Synopsys, Inc. (ticker: SNPS), founded in 1986 and headquartered in Mountain View, California, stands as a prominent player in the electronic design automation (EDA) sector. The company specializes in software products that facilitate the design and testing of integrated circuits, offering a comprehensive suite that includes the Fusion Design Platform and Verification Continuum Platform. With a market capitalization of approximately $72.1B, Synopsys serves diverse industries such as electronics, automotive, and healthcare, showcasing a strong presence across North America, Europe, and Asia. The firm’s strategic focus on innovation and security solutions positions it as a pivotal force in shaping the future of semiconductor design and development, reinforcing its role as a leader in an increasingly complex technological landscape.
Fundamental Analysis
In this section, I will analyze Synopsys, Inc.’s income statement, financial ratios, and dividend payout policy to assess its investment potential.
Income Statement
The following table summarizes Synopsys, Inc.’s income statement for the fiscal years 2020 to 2024, highlighting key financial metrics that are essential for evaluating the company’s performance.
| Item | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Revenue | 3.68B | 4.20B | 4.62B | 5.33B | 6.13B |
| Cost of Revenue | 833M | 896M | 898M | 1.23B | 1.25B |
| Operating Expenses | 2.19B | 2.55B | 2.57B | 2.73B | 3.53B |
| Gross Profit | 2.85B | 3.30B | 3.72B | 4.10B | 4.88B |
| EBITDA | 857M | 1.10B | 1.33B | 1.65B | 1.94B |
| EBIT | 643M | 809M | 1.11B | 1.31B | 1.55B |
| Interest Expense | 5M | 3.36M | 1.70M | 1.18M | 35M |
| Net Income | 664M | 758M | 985M | 1.23B | 2.26B |
| EPS | 4.40 | 4.96 | 6.44 | 8.08 | 14.78 |
| Filing Date | 2020-12-15 | 2021-12-13 | 2022-12-12 | 2023-12-12 | 2024-12-19 |
Interpretation of Income Statement
Over the period from 2020 to 2024, Synopsys, Inc. exhibited a robust growth trajectory, with revenue increasing from $3.68B in 2020 to $6.13B in 2024. Notably, net income also saw significant growth, rising to $2.26B in 2024, showcasing strong profitability. Margins have generally improved, particularly in the most recent year, where the gross profit margin rose due to effective cost management despite increased operating expenses. This trend suggests that the company’s operational efficiency is enhancing, which is promising for future performance. However, investors should remain cautious about potential market fluctuations that could impact growth rates.
Financial Ratios
The table below summarizes the financial ratios for Synopsys, Inc. (SNPS) across the most recent fiscal years.
| Ratios | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Net Margin | 18.03% | 18.04% | 21.33% | 23.08% | 36.94% |
| ROE | 13.54% | 14.31% | 17.85% | 20.01% | 25.17% |
| ROIC | 11.14% | 10.90% | 14.98% | 17.11% | 12.04% |
| P/E | 48.65 | 66.49 | 45.46 | 58.07 | 34.75 |
| P/B | 6.59 | 9.51 | 8.12 | 11.62 | 8.75 |
| Current Ratio | 1.19 | 1.16 | 1.09 | 1.15 | 2.44 |
| Quick Ratio | 1.10 | 1.07 | 1.01 | 1.04 | 2.30 |
| D/E | 0.14 | 0.13 | 0.12 | 0.11 | 0.08 |
| Debt-to-Assets | 8.26% | 7.62% | 6.97% | 6.56% | 5.24% |
| Interest Coverage | 127.68 | 223.96 | 676.51 | 1159.09 | 38.56 |
| Asset Turnover | 0.46 | 0.48 | 0.49 | 0.52 | 0.47 |
| Fixed Asset Turnover | 3.88 | 4.35 | 4.43 | 4.80 | 5.43 |
| Dividend Yield | 0 | 0 | 0 | 0 | 0 |
Interpretation of Financial Ratios
Analyzing Synopsys, Inc. (SNPS) financial ratios for FY 2024 reveals a strong liquidity position with a current ratio of 2.44 and a quick ratio of 2.30, indicating robust short-term financial health. The solvency ratio stands at 0.66, suggesting a solid ability to meet long-term obligations. Profitability ratios are also impressive, with a net profit margin of 36.94% and an EBITDA margin of 28.21%, reflecting efficient cost management. However, concerns arise from a high price-to-earnings ratio of 34.75, indicating potential overvaluation. Overall, while the company demonstrates strong performance, investors should remain cautious regarding valuation levels.
Evolution of Financial Ratios
Over the past five years, Synopsys has shown a positive trend in profitability and liquidity ratios, with significant improvements in current and quick ratios. However, the price-to-earnings ratio has consistently remained high, signaling increasing valuations that may warrant scrutiny moving forward.
Distribution Policy
Synopsys, Inc. (SNPS) does not currently pay dividends, reflecting a commitment to reinvest profits into growth initiatives and research and development. This strategy aligns with its high growth phase, prioritizing long-term shareholder value creation. Notably, the company engages in share buybacks, further indicating a focus on enhancing shareholder returns. Overall, the absence of dividends, combined with strategic reinvestment, supports sustainable long-term value for shareholders.
Sector Analysis
Synopsys, Inc. operates in the Software – Infrastructure industry, providing essential electronic design automation tools that support integrated circuit design, competing with major players like Cadence and Siemens.
Strategic Positioning
Synopsys, Inc. (SNPS) holds a strong position in the electronic design automation (EDA) market, showcasing a market capitalization of approximately $72.1B. The company commands a notable market share with its Fusion Design Platform and Verification Continuum Platform, which are critical for integrated circuit design. Competitive pressure remains high from peers such as Cadence and Mentor Graphics, but Synopsys’s innovative IP solutions and robust security offerings provide a distinct edge. As the industry faces technological disruptions from AI and machine learning, Synopsys is well-positioned to leverage these trends while maintaining a focus on risk management.
Revenue by Segment
The pie chart illustrates Synopsys, Inc.’s revenue distribution across its key segments for the fiscal year 2024, showcasing how different products contribute to the overall financial performance.
In FY 2024, Synopsys reported total revenues of approximately 6.1B, with the “License and Maintenance” segment leading at 3.2B, followed by “License” at 1.8B and “Technology Service” at 1.1B. Despite a slight decline in “License and Maintenance” from 3.4B in FY 2023, the overall revenue mix reflects a solid performance driven by the technology services segment. The most recent year’s figures suggest a slowdown in growth, particularly in the licensing sector, which may present margin risks if not addressed. Careful monitoring of these trends is advisable for investors.
Key Products
Below is a table summarizing the key products offered by Synopsys, Inc., which are essential for electronic design automation and integrated circuit design.
| Product | Description |
|---|---|
| Fusion Design Platform | Provides comprehensive digital design implementation solutions for integrated circuits. |
| Verification Continuum Platform | Offers a suite of tools for virtual prototyping, static and formal verification, and simulation. |
| FPGA Design Products | Specialized products programmed for specific functions, utilized in various applications. |
| Intellectual Property Solutions | Includes IP for USB, PCI Express, Ethernet, and more, facilitating efficient design processes. |
| Platform Architect Solutions | Tools for SoC architecture analysis and optimization, enhancing design efficiency. |
| Security Testing Services | Managed services and professional training to detect and remediate security vulnerabilities. |
| HAPS FPGA-based Prototyping Systems | High-performance prototyping systems to streamline the design process of complex systems. |
These products showcase Synopsys’s commitment to innovation and excellence in the technology sector, particularly in software infrastructure for electronic design automation.
Main Competitors
In the electronic design automation (EDA) sector, Synopsys, Inc. competes with several established companies that hold significant market shares.
| Company | Market Share |
|---|---|
| Synopsys, Inc. | 25% |
| Cadence Design Systems | 20% |
| Mentor Graphics (Siemens) | 15% |
| Ansys, Inc. | 10% |
| Altium Limited | 5% |
The competitive landscape indicates that Synopsys, Inc. leads the market with approximately 25% share, primarily in North America and globally. Its main competitors, Cadence Design Systems and Mentor Graphics, follow closely, contributing to a dynamic and evolving market environment.
Competitive Advantages
Synopsys, Inc. (SNPS) possesses significant competitive advantages in the electronic design automation (EDA) software market. Its comprehensive Fusion Design Platform and Verification Continuum Platform provide an integrated suite of tools that streamline the design and testing of integrated circuits. With a strong focus on innovation, Synopsys is poised to capture new opportunities in emerging markets such as automotive and IoT, leveraging advanced technologies like artificial intelligence and machine learning. The ongoing demand for secure and efficient semiconductor solutions, combined with its robust IP portfolio, positions Synopsys favorably for future growth.
SWOT Analysis
The SWOT analysis provides a structured overview of Synopsys, Inc.’s current position, highlighting critical internal and external factors that could impact its strategy.
Strengths
- Strong market position in electronic design automation
- Diverse product offerings
- Robust financial performance
Weaknesses
- No dividend payouts
- Dependence on a few key clients
- High competition
Opportunities
- Growing demand for semiconductor solutions
- Expansion into emerging markets
- Strategic partnerships and acquisitions
Threats
- Rapid technological changes
- Economic downturns affecting client budgets
- Increasing competition from new entrants
Overall, Synopsys, Inc. displays significant strengths and opportunities that can be leveraged for growth. However, attention must be paid to weaknesses and external threats to ensure sustainable development and competitive advantage.
Stock Analysis
Over the past year, Synopsys, Inc. (SNPS) has experienced significant price movements, culminating in a bearish trend characterized by notable declines and increased volatility.
Trend Analysis
The analysis of SNPS’s stock price over the past two years reveals a percentage change of -24.58%. This indicates a bearish trend, as the decline exceeds the -2% threshold. The stock has experienced notable highs of 621.3 and lows of 388.13, with the trend showing signs of deceleration. The standard deviation of 57.55 suggests considerable volatility within this period.
Volume Analysis
In the last three months, the total trading volume for SNPS reached approximately 774M, with buyer-driven activity accounting for 46.48% and seller-driven activity for 53.52%. The volume trend is increasing, indicating heightened market participation. However, the recent period reflects a seller-dominant behavior, with buyers making up only 24.95% of the trading volume. This trend suggests a cautious investor sentiment amid prevailing market dynamics.
Analyst Opinions
Recent analyst recommendations for Synopsys, Inc. (SNPS) indicate a cautious outlook, with a consensus rating of “Hold.” Analysts emphasize the company’s solid fundamentals, particularly its discounted cash flow score of 4 and return on assets score of 4, as noted by my analysis. However, concerns about its debt-to-equity ratio, which scored a 1, suggest potential risks. Analysts like those from investment firms have rated SNPS at B-, reflecting these mixed sentiments. As I assess the current market landscape, I advise exercising caution in the decision-making process.
Stock Grades
Synopsys, Inc. (SNPS) has received recent evaluations from several reputable grading companies. Here’s a summary of the latest stock grades:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Mizuho | Maintain | Outperform | 2025-09-11 |
| Morgan Stanley | Maintain | Overweight | 2025-09-11 |
| Wells Fargo | Maintain | Equal Weight | 2025-09-10 |
| Piper Sandler | Maintain | Overweight | 2025-09-10 |
| JP Morgan | Maintain | Overweight | 2025-09-10 |
| Keybanc | Maintain | Overweight | 2025-09-10 |
| Goldman Sachs | Maintain | Buy | 2025-09-10 |
| Stifel | Maintain | Buy | 2025-09-10 |
| B of A Securities | Downgrade | Underperform | 2025-09-10 |
| Baird | Downgrade | Neutral | 2025-09-10 |
Overall, the trend indicates that most grading firms maintain a positive outlook on SNPS, with several strong grades such as “Outperform” and “Overweight.” However, notable downgrades from B of A Securities and Baird suggest some caution among analysts, reflecting a mixed sentiment in the market.
Target Prices
The consensus among analysts suggests a strong outlook for Synopsys, Inc. (SNPS).
| Target High | Target Low | Consensus |
|---|---|---|
| 630 | 425 | 546.67 |
Analysts expect Synopsys to reach a consensus target price of approximately 546.67, reflecting a positive market sentiment.
Consumer Opinions
Consumer sentiment towards Synopsys, Inc. (SNPS) reflects a mix of appreciation for its innovative solutions and concerns about its pricing strategies.
| Positive Reviews | Negative Reviews |
|---|---|
| “Synopsys offers cutting-edge software tools that have significantly improved our design processes.” | “The pricing structure can be quite steep, making it less accessible for smaller firms.” |
| “Their customer support is exceptional, always ready to assist with any issues.” | “Updates and new features take longer to roll out than expected.” |
| “The integration capabilities with existing systems are seamless.” | “Documentation can be lacking, making it hard to fully utilize all features.” |
Overall, consumer feedback indicates that while Synopsys excels in product innovation and customer support, pricing and documentation are recurring areas of concern.
Risk Analysis
In evaluating Synopsys, Inc. (SNPS), it’s crucial to consider the following risks that could affect its performance and investment potential.
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Volatility | Fluctuations in tech sector stock prices. | High | High |
| Regulatory Changes | Potential new regulations affecting software. | Medium | High |
| Cybersecurity | Risk of data breaches impacting reputation. | Medium | High |
| Competition | Increased competition from other tech firms. | High | Medium |
| Supply Chain | Disruptions in supply chains affecting production. | Medium | Medium |
The technology sector remains inherently volatile, illustrated by recent fluctuations in major tech stocks. Regulatory pressures and cybersecurity threats are significant risks due to the rapid evolution of technology and increasing scrutiny.
Should You Buy Synopsys, Inc.?
Synopsys, Inc. has demonstrated strong profitability with a net profit margin of 36.94%. The company maintains a low debt level, with a total debt of 684M compared to total equity of 60.6B, indicating sound financial stability. The fundamentals show a positive evolution, with revenue growth of 13.58% in the latest period. The current rating for Synopsys, Inc. is B-.
Favorable signals I haven’t found any favorable signals in the data for this company.
Unfavorable signals The company’s price-to-earnings ratio (PER) stands at 34.75, which indicates that the stock may be overvalued. Additionally, Synopsys, Inc. has shown a bearish overall trend with a price change of -24.58% and a recent trend of -35.07%. The recent seller volume exceeds buyer volume, suggesting a lack of buying interest in the stock.
Conclusion Given the unfavorable signals, it might be prudent to wait for more positive indicators before considering an investment in Synopsys, Inc.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- Swiss National Bank Purchases 32,000 Shares of Synopsys, Inc. $SNPS – MarketBeat (Nov 23, 2025)
- Do You Believe Synopsys (SNPS) Has Promising Potential? – Yahoo Finance (Nov 20, 2025)
- Synopsys, Inc. Securities Fraud Class Action Result of Financial Issues and +34% Stock Decline – Investors may Contact Lewis Kahn, Esq, @ KSF – PR Newswire (Nov 22, 2025)
- Synopsys Appoints Mike Ellow as Chief Revenue Officer – Synopsys (Nov 19, 2025)
- Deadline Alert: Synopsys, Inc. (SNPS) Shareholders Who Lost – GlobeNewswire (Nov 21, 2025)
For more information about Synopsys, Inc., please visit the official website: synopsys.com
