Yahoo Finance Results: Synopsys, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates
Synopsys, Inc. (NASDAQ:SNPS) shares fell 5.1% to US$155 in the week since its latest quarterly results. Revenues were US$834m, approximately in line with what analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.67, an impressive 27% ahead of estimates. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what analysts' statutory forecasts suggest is in store for next year.
Check out our latest analysis for Synopsys
After the latest results, the 13 analysts covering Synopsys are now predicting revenues of US$3.64b in 2020. If met, this would reflect an okay 7.8% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to ascend 17% to US$3.76. Yet prior to the latest earnings, analysts had been forecasting revenues of US$3.63b and earnings per share (EPS) of US$3.82 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 11% to US$170. It looks as though analysts previously had some doubts over whether the business would live up to their expectations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Synopsys analyst has a price target of US$200 per share, while the most pessimistic values it at US$107. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. It's pretty clear that analysts expect Synopsys's revenue growth will slow down substantially, with revenues next year expected to grow 7.8%, compared to a historical growth rate of 10% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 12% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Synopsys to grow slower than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Synopsys's revenues are expected to perform worse than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Synopsys. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Synopsys going out to 2023, and you can see them free on our platform here..
Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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