Why Synopsys Stock Is Rated a "Strong Buy" Today

by Rob Otman

Synopsys (Nasdaq: SNPS) is a $12 billion company today. Investors that bought shares one year ago are sitting on a 54.54% total return. That's above the S&P 500's return of 18.65%.

Synopsys stock is beating the market, and it reports earnings tomorrow. But does that make it a good buy today? To answer this question we've turned to the Investment U Stock Grader. Our research team built this system to diagnose the financial health of a company.

Our system looks at six key metrics...

Earnings-per-Share (EPS) Growth: Synopsys reported a recent EPS growth rate of 46.15%. That's above the software industry average of 33.37%. That's a great sign. Synopsys Inc.'s earnings growth is outpacing competitors.

Price-to-Earnings (P/E): The average price-to-earnings ratio of the software industry is 72.33. And Synopsys' ratio comes in at 36.01. It's trading at a better value than many of its competitors.

Debt-to-Equity The debt-to-equity ratio for Synopsys stock is 9.61. That's below the software industry average of 76.9. The company is less leveraged.

Free Cash Flow per Share Growth Synopsys' FCF has been higher than its competitors over the last year. That's good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.

Profit Margins The profit margin of Synopsys comes in at 13.26% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Synopsys' profit margin is above the software average of 10.21%. So that's a positive indicator for investors.

Return on Equity Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Synopsys is 9.29%, and that's above its industry average ROE of 9.11%.

Synopsys stock passes six of our six key metrics today. That's why our Investment U Stock Grader rates it as a strong buy.


Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth. For more details, click here.

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