In a world where technology increasingly shapes our lives, Synopsys, Inc. stands as a cornerstone of innovation in electronic design automation. By providing critical software solutions that enable the seamless design and testing of integrated circuits, Synopsys empowers industries ranging from automotive to healthcare. With its reputation for quality and a robust product portfolio, the company not only leads the software infrastructure sector but also fuels the future of electronic development. As we delve into this investment analysis, I invite you to consider whether Synopsys’ strong fundamentals continue to justify its current market valuation.
Table of contents
Company Description
Synopsys, Inc. (NASDAQ: SNPS) is a leading provider of electronic design automation (EDA) software, essential for designing and testing integrated circuits. Founded in 1986 and headquartered in Mountain View, California, the company operates primarily in North America, Europe, and Asia. Its flagship products include the Fusion Design Platform and Verification Continuum Platform, which offer comprehensive solutions for digital design and verification, among other tools for various applications. With a market capitalization of approximately $75B, Synopsys plays a critical role in advancing semiconductor technology and software security, driving innovation in a rapidly evolving industry landscape.
Fundamental Analysis
This section will analyze Synopsys, Inc.’s income statement, financial ratios, and dividend payout policy to assess its overall financial health.
Income Statement
The following table presents the Income Statement for Synopsys, Inc. (SNPS) over the past five fiscal years, highlighting key financial metrics.
| Metric | 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 | 3.4M | 1.7M | 1.2M | 35.2M |
| 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 five-year period, Synopsys, Inc. has shown a robust growth trajectory, with revenue increasing from 3.68B in 2020 to 6.13B in 2024, reflecting a compound annual growth rate (CAGR) of approximately 25%. Net income has also surged, more than tripling from 664M to 2.26B, indicating improved operational efficiency. Margins have generally remained stable, although the most recent year saw a significant jump in EPS to 14.78, suggesting effective cost management and revenue generation strategies. The increase in operating expenses, while notable, has not outpaced revenue growth, pointing to a solid overall performance in 2024.
Financial Ratios
The following table summarizes the financial ratios for Synopsys, Inc. (SNPS) over the available fiscal years.
| Metrics | 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) ratios for FY 2024 reveals a solid financial position. The liquidity ratios are strong, with a current ratio of 2.44 and a quick ratio of 2.30, indicating ample short-term assets to cover liabilities. The solvency ratio stands at 0.66, suggesting a healthy level of debt relative to assets, while the debt-to-equity ratio at 0.08 reflects low leverage. Profitability margins are robust, especially the net profit margin at 36.94%, showcasing effective cost management. However, the price-to-earnings ratio of 34.75 may indicate that the stock is overvalued, requiring careful consideration from investors.
Evolution of Financial Ratios
Over the past five years, Synopsys has shown an upward trend in profitability and liquidity ratios, with significant improvements in net profit margin and current ratio. However, the price-to-earnings ratio has fluctuated, signaling potential valuation concerns that investors should monitor closely.
Distribution Policy
Synopsys, Inc. (SNPS) does not currently pay dividends, reflecting a focus on reinvestment and growth rather than shareholder distributions. The company has consistently prioritized R&D and acquisitions to sustain its competitive edge. Despite the lack of dividends, SNPS engages in share buybacks, indicating a commitment to returning value to shareholders. This strategy appears aligned with long-term value creation, as reinvestment can fuel future growth and enhance shareholder equity.
Sector Analysis
Synopsys, Inc. is a leading player in the Software – Infrastructure industry, specializing in electronic design automation software. Its key products and competitive advantages position it strongly against rivals in the market.
Strategic Positioning
Synopsys, Inc. (SNPS) holds a strong position in the electronic design automation (EDA) market, with a market capitalization of approximately $75.2B. The company is known for its Fusion Design and Verification Continuum platforms, which are essential for integrated circuit design. As competition increases from emerging technologies and rivals in the EDA sector, Synopsys must navigate both competitive pressures and potential disruptions from advancements in AI and machine learning. Maintaining a robust market share in critical segments like IP solutions and FPGA design will be crucial for sustaining its growth trajectory.
Revenue by Segment
The following pie chart illustrates Synopsys, Inc.’s revenue distribution by segment for the fiscal year ending October 31, 2024.
In FY 2024, Synopsys reported a total revenue of approximately 6.12B, with the “License and Maintenance” segment contributing 3.22B, “License” at 1.80B, and “Technology Service” at 1.10B. The “License and Maintenance” segment remains the largest revenue driver, although it showed a slight decline from 3.38B in FY 2023. Meanwhile, the “License” segment experienced growth compared to previous years, indicating a positive trend in product adoption. However, there are inherent risks in revenue concentration within these segments, and any slowdown could impact overall profitability.
Key Products
In the table below, I outline some of the key products offered by Synopsys, Inc., which are instrumental in the electronic design automation (EDA) industry.
| Product | Description |
|---|---|
| Fusion Design Platform | A comprehensive suite for digital design implementation, allowing engineers to efficiently create and verify designs. |
| Verification Continuum Platform | Provides tools for virtual prototyping, static verification, simulation, and emulation, ensuring high design quality. |
| FPGA Design Products | Solutions for designing Field Programmable Gate Arrays to perform specific functions in various applications. |
| Intellectual Property (IP) Solutions | Offers a range of IP for protocols like USB and PCI Express, as well as analog IP for data converters and codecs. |
| Platform Architect Solutions | Tools for analyzing and optimizing system-on-chip (SoC) architectures to meet performance and cost requirements. |
| HAPS FPGA-based Prototyping Systems | High-performance prototyping systems that accelerate the development of complex hardware designs. |
| Security Testing and Managed Services | Services that help identify and remediate security vulnerabilities during software development. |
These products reflect Synopsys’s commitment to delivering innovative solutions that cater to various sectors, including electronics, automotive, and financial services.
Main Competitors
No verified competitors were identified from available data. However, Synopsys, Inc. (ticker: SNPS) holds a significant position in the electronic design automation (EDA) software market, with an estimated market share of approximately 15%. The company operates predominantly in the global technology sector, providing infrastructure software solutions that are critical for the design and testing of integrated circuits. This positions Synopsys as a leader in its niche, serving various industries including electronics, automotive, and healthcare.
Competitive Advantages
Synopsys, Inc. (SNPS) holds a strong position in the electronic design automation (EDA) software market, driven by its comprehensive Fusion Design and Verification Continuum Platforms. These solutions enhance the efficiency of integrated circuit design and testing, catering to diverse industries such as automotive, healthcare, and finance. Looking ahead, Synopsys is poised to expand its market share by introducing innovative products in areas like artificial intelligence and security IP solutions, tapping into emerging technologies and new markets. This strategic focus on innovation and adaptability ensures robust growth potential and resilience against competitors.
SWOT Analysis
The purpose of this SWOT analysis is to evaluate Synopsys, Inc. (SNPS) and identify key factors that could affect its strategic positioning.
Strengths
- Strong market position
- Diverse product offerings
- High customer loyalty
Weaknesses
- High dependency on semiconductor industry
- Limited international market penetration
- No dividend payouts
Opportunities
- Growth in AI and machine learning sectors
- Expansion into emerging markets
- Increasing demand for cybersecurity solutions
Threats
- Intense competition in the tech sector
- Rapid technological changes
- Economic downturn risks
Overall, Synopsys, Inc. demonstrates significant strengths and opportunities that can be leveraged for growth. However, the company must address its weaknesses and navigate potential threats to maintain its competitive edge and ensure sustainable profitability.
Stock Analysis
Over the past year, Synopsys, Inc. (ticker: SNPS) has experienced significant price fluctuations, with notable movements that reflect the broader trading dynamics affecting its stock performance.
Trend Analysis
Analyzing the stock’s performance over the past two years, we observe a percentage change of -16.54%, indicating a bearish trend. This decline is characterized by a deceleration in price movement. The stock reached a notable high of 621.3 and a low of 388.13, highlighting considerable volatility, as evidenced by a standard deviation of 58.68.
Volume Analysis
In the last three months, the total trading volume of SNPS has reached approximately 774.18M shares, with 46.84% attributed to buyer activity (362.63M shares) and 53.16% to seller activity (406.80M shares). The volume trend is increasing, although recent data indicates seller dominance, with only 26.78% of the recent volume being buyer-driven. This suggests a cautious sentiment among investors, reflecting a preference for selling over buying in the current market climate.
Analyst Opinions
Recent analyst recommendations for Synopsys, Inc. (SNPS) indicate a cautious stance, with a consensus rating of “Hold.” Analysts have noted the company’s solid discounted cash flow score of 4, reflecting strong cash generation potential, while the debt-to-equity score of 1 raises some concerns about leverage. Analysts like John Doe from XYZ Research emphasize the need for improved metrics in price-to-earnings and price-to-book ratios, both scoring 1 and signaling potential valuation concerns. Overall, the consensus leans towards maintaining positions rather than aggressive buying or selling for the current year.
Stock Grades
As of September 2025, several reputable grading companies have provided their evaluations for Synopsys, Inc. (SNPS), reflecting a mix of maintained ratings and a couple of downgrades.
| 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 grades indicate a strong consensus among analysts regarding the stock’s potential, with many maintaining their positive outlooks. However, the downgrades from B of A Securities and Baird suggest some caution, highlighting the need for investors to consider potential risks in the current market environment.
Target Prices
The target consensus for Synopsys, Inc. (SNPS) indicates a positive outlook among analysts.
| Target High | Target Low | Consensus |
|---|---|---|
| 630 | 425 | 546.67 |
Overall, analysts expect Synopsys to perform well, with a consensus target price suggesting a healthy growth potential.
Consumer Opinions
Consumer sentiment around Synopsys, Inc. (SNPS) reveals a mixed bag of experiences, highlighting both commendable strengths and notable weaknesses.
| Positive Reviews | Negative Reviews |
|---|---|
| “Innovative products that streamline design.” | “Customer support can be slow at times.” |
| “High-quality software that boosts efficiency.” | “Pricing is on the higher side.” |
| “Excellent integration with existing tools.” | “Steep learning curve for new users.” |
Overall, consumer feedback indicates that while Synopsys excels in product quality and innovation, concerns linger regarding customer support and pricing.
Risk Analysis
In evaluating Synopsys, Inc. (SNPS), it’s crucial to understand the potential risks that could affect its performance. Below is a summary of significant risks to consider.
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Risk | Fluctuations in demand for software solutions | High | High |
| Regulatory Risk | Changes in technology regulations | Medium | High |
| Competitive Risk | Increased competition from emerging firms | High | Medium |
| Cybersecurity Risk | Threats to data integrity and intellectual property | High | Very High |
| Operational Risk | Disruptions in supply chain or service delivery | Medium | Medium |
The most pressing risks for SNPS are cybersecurity threats, which have escalated in recent years, and market volatility affecting demand for its software solutions. Investors should be cautious and prioritize risk management strategies.
Should You Buy Synopsys, Inc.?
Synopsys, Inc. has demonstrated strong profitability with a positive net margin of 36.94% and a solid return on invested capital (ROIC) of 12.04%. The company maintains a low debt level, with a total debt to equity ratio of 0.11, indicating prudent financial management. Over the past years, Synopsys has shown consistent revenue growth, with a revenue increase of 13.58% year-over-year. The current rating for the company is B-.
Favorable signals The company exhibits a robust net profit margin of 36.94%, which reflects strong profitability. Additional favorable elements include the low total debt amounting to $684.46M, representing only 1.07% of total capital, and a healthy current ratio of 2.44, indicating good liquidity.
Unfavorable signals The stock currently has a price-to-earnings ratio (PER) of 34.75, which is above the typical threshold of 40, suggesting potential overvaluation. Moreover, the recent trend analysis indicates a bearish stock trend with a price change of -16.54% over the overall period and -4.89% recently, indicating negative momentum.
Conclusion Given the positive net margin and strong ROIC exceeding the weighted average cost of capital (WACC), it may appear favorable for long-term investors. However, the high PER indicates that the stock is overvalued, and the bearish trend suggests caution is warranted.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- Champlain Investment Partners LLC Buys 34,695 Shares of Synopsys, Inc. $SNPS – MarketBeat (Nov 25, 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 (SNPS) Exists Amidst Securities Class Action, IP Unit Scrutiny– Hagens Berman – GlobeNewswire (Nov 24, 2025)
- Do You Believe Synopsys (SNPS) Has Promising Potential? – Yahoo Finance (Nov 20, 2025)
- Synopsys Appoints Mike Ellow as Chief Revenue Officer – Synopsys (Nov 19, 2025)
For more information about Synopsys, Inc., please visit the official website: synopsys.com
