Intrinsic value of Synopsys, Inc. - SNPS

Previous Close

$110.31

  Intrinsic Value

$55.18

stock screener

  Rating & Target

sell

-50%

Previous close

$110.31

 
Intrinsic value

$55.18

 
Up/down potential

-50%

 
Rating

sell

We calculate the intrinsic value of SNPS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 16.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.60
  6.44
  6.30
  6.17
  6.05
  5.94
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.18
  5.16
  5.14
  5.13
  5.11
  5.10
  5.09
  5.08
  5.08
Revenue, $m
  3,327
  3,541
  3,764
  3,996
  4,238
  4,490
  4,753
  5,027
  5,313
  5,611
  5,923
  6,249
  6,590
  6,946
  7,319
  7,709
  8,117
  8,545
  8,992
  9,461
  9,953
  10,468
  11,008
  11,574
  12,167
  12,790
  13,442
  14,127
  14,845
  15,598
Variable operating expenses, $m
  2,878
  3,041
  3,210
  3,387
  3,570
  3,762
  3,961
  4,169
  4,387
  4,613
  4,500
  4,748
  5,006
  5,277
  5,560
  5,857
  6,167
  6,492
  6,832
  7,188
  7,561
  7,953
  8,363
  8,793
  9,244
  9,717
  10,212
  10,733
  11,278
  11,851
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,878
  3,041
  3,210
  3,387
  3,570
  3,762
  3,961
  4,169
  4,387
  4,613
  4,500
  4,748
  5,006
  5,277
  5,560
  5,857
  6,167
  6,492
  6,832
  7,188
  7,561
  7,953
  8,363
  8,793
  9,244
  9,717
  10,212
  10,733
  11,278
  11,851
Operating income, $m
  449
  500
  554
  610
  668
  728
  792
  857
  926
  998
  1,423
  1,501
  1,583
  1,669
  1,758
  1,852
  1,950
  2,053
  2,161
  2,273
  2,391
  2,515
  2,645
  2,781
  2,923
  3,073
  3,230
  3,394
  3,567
  3,748
EBITDA, $m
  920
  979
  1,041
  1,105
  1,172
  1,242
  1,315
  1,390
  1,469
  1,552
  1,638
  1,728
  1,823
  1,921
  2,024
  2,132
  2,245
  2,363
  2,487
  2,617
  2,753
  2,895
  3,045
  3,201
  3,365
  3,537
  3,718
  3,907
  4,106
  4,314
Interest expense (income), $m
  7
  25
  35
  45
  55
  66
  77
  88
  101
  113
  126
  140
  155
  170
  185
  202
  219
  237
  256
  276
  296
  318
  340
  364
  389
  415
  443
  471
  501
  533
  566
Earnings before tax, $m
  424
  466
  509
  555
  602
  652
  703
  757
  813
  871
  1,283
  1,347
  1,414
  1,484
  1,557
  1,633
  1,713
  1,797
  1,885
  1,977
  2,074
  2,175
  2,281
  2,392
  2,508
  2,630
  2,758
  2,893
  3,034
  3,182
Tax expense, $m
  114
  126
  138
  150
  163
  176
  190
  204
  219
  235
  346
  364
  382
  401
  420
  441
  463
  485
  509
  534
  560
  587
  616
  646
  677
  710
  745
  781
  819
  859
Net income, $m
  309
  340
  372
  405
  440
  476
  513
  552
  593
  636
  937
  983
  1,032
  1,083
  1,136
  1,192
  1,251
  1,312
  1,376
  1,443
  1,514
  1,587
  1,665
  1,746
  1,831
  1,920
  2,014
  2,112
  2,215
  2,323

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  6,549
  6,971
  7,410
  7,867
  8,343
  8,839
  9,356
  9,895
  10,458
  11,046
  11,660
  12,301
  12,972
  13,673
  14,407
  15,175
  15,978
  16,820
  17,701
  18,625
  19,592
  20,606
  21,669
  22,783
  23,951
  25,176
  26,461
  27,809
  29,223
  30,706
Adjusted assets (=assets-cash), $m
  6,549
  6,971
  7,410
  7,867
  8,343
  8,839
  9,356
  9,895
  10,458
  11,046
  11,660
  12,301
  12,972
  13,673
  14,407
  15,175
  15,978
  16,820
  17,701
  18,625
  19,592
  20,606
  21,669
  22,783
  23,951
  25,176
  26,461
  27,809
  29,223
  30,706
Revenue / Adjusted assets
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
  0.508
Average production assets, $m
  2,029
  2,160
  2,296
  2,438
  2,585
  2,739
  2,899
  3,066
  3,241
  3,423
  3,613
  3,812
  4,020
  4,237
  4,464
  4,702
  4,951
  5,212
  5,485
  5,771
  6,071
  6,385
  6,715
  7,060
  7,422
  7,802
  8,200
  8,617
  9,055
  9,515
Working capital, $m
  -1,001
  -1,066
  -1,133
  -1,203
  -1,276
  -1,351
  -1,431
  -1,513
  -1,599
  -1,689
  -1,783
  -1,881
  -1,983
  -2,091
  -2,203
  -2,320
  -2,443
  -2,572
  -2,707
  -2,848
  -2,996
  -3,151
  -3,313
  -3,484
  -3,662
  -3,850
  -4,046
  -4,252
  -4,468
  -4,695
Total debt, $m
  645
  828
  1,018
  1,217
  1,423
  1,638
  1,863
  2,097
  2,341
  2,596
  2,863
  3,141
  3,432
  3,737
  4,055
  4,388
  4,737
  5,102
  5,485
  5,886
  6,305
  6,746
  7,207
  7,690
  8,197
  8,729
  9,287
  9,872
  10,485
  11,129
Total liabilities, $m
  2,842
  3,025
  3,216
  3,414
  3,621
  3,836
  4,060
  4,294
  4,539
  4,794
  5,060
  5,339
  5,630
  5,934
  6,253
  6,586
  6,935
  7,300
  7,682
  8,083
  8,503
  8,943
  9,404
  9,888
  10,395
  10,927
  11,484
  12,069
  12,683
  13,326
Total equity, $m
  3,707
  3,946
  4,194
  4,453
  4,722
  5,003
  5,295
  5,601
  5,919
  6,252
  6,599
  6,962
  7,342
  7,739
  8,154
  8,589
  9,044
  9,520
  10,019
  10,542
  11,089
  11,663
  12,265
  12,895
  13,556
  14,250
  14,977
  15,740
  16,540
  17,379
Total liabilities and equity, $m
  6,549
  6,971
  7,410
  7,867
  8,343
  8,839
  9,355
  9,895
  10,458
  11,046
  11,659
  12,301
  12,972
  13,673
  14,407
  15,175
  15,979
  16,820
  17,701
  18,625
  19,592
  20,606
  21,669
  22,783
  23,951
  25,177
  26,461
  27,809
  29,223
  30,705
Debt-to-equity ratio
  0.170
  0.210
  0.240
  0.270
  0.300
  0.330
  0.350
  0.370
  0.400
  0.420
  0.430
  0.450
  0.470
  0.480
  0.500
  0.510
  0.520
  0.540
  0.550
  0.560
  0.570
  0.580
  0.590
  0.600
  0.600
  0.610
  0.620
  0.630
  0.630
  0.640
Adjusted equity ratio
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566
  0.566

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  309
  340
  372
  405
  440
  476
  513
  552
  593
  636
  937
  983
  1,032
  1,083
  1,136
  1,192
  1,251
  1,312
  1,376
  1,443
  1,514
  1,587
  1,665
  1,746
  1,831
  1,920
  2,014
  2,112
  2,215
  2,323
Depreciation, amort., depletion, $m
  471
  479
  487
  496
  504
  513
  523
  533
  543
  554
  215
  227
  239
  252
  266
  280
  295
  310
  327
  344
  361
  380
  400
  420
  442
  464
  488
  513
  539
  566
Funds from operations, $m
  780
  819
  859
  901
  944
  989
  1,036
  1,085
  1,137
  1,190
  1,152
  1,210
  1,271
  1,335
  1,402
  1,472
  1,545
  1,622
  1,703
  1,787
  1,875
  1,968
  2,065
  2,166
  2,273
  2,385
  2,502
  2,625
  2,754
  2,889
Change in working capital, $m
  -62
  -64
  -67
  -70
  -73
  -76
  -79
  -82
  -86
  -90
  -94
  -98
  -103
  -107
  -112
  -117
  -123
  -129
  -135
  -141
  -148
  -155
  -163
  -170
  -179
  -187
  -196
  -206
  -216
  -227
Cash from operations, $m
  842
  883
  926
  970
  1,017
  1,065
  1,115
  1,168
  1,223
  1,280
  1,245
  1,308
  1,374
  1,442
  1,514
  1,590
  1,668
  1,751
  1,837
  1,928
  2,023
  2,123
  2,227
  2,337
  2,451
  2,572
  2,698
  2,831
  2,970
  3,116
Maintenance CAPEX, $m
  -113
  -121
  -129
  -137
  -145
  -154
  -163
  -173
  -183
  -193
  -204
  -215
  -227
  -239
  -252
  -266
  -280
  -295
  -310
  -327
  -344
  -361
  -380
  -400
  -420
  -442
  -464
  -488
  -513
  -539
New CAPEX, $m
  -126
  -131
  -136
  -142
  -147
  -154
  -160
  -167
  -174
  -182
  -190
  -199
  -208
  -217
  -227
  -238
  -249
  -261
  -273
  -286
  -300
  -314
  -329
  -345
  -362
  -380
  -398
  -418
  -438
  -460
Cash from investing activities, $m
  -239
  -252
  -265
  -279
  -292
  -308
  -323
  -340
  -357
  -375
  -394
  -414
  -435
  -456
  -479
  -504
  -529
  -556
  -583
  -613
  -644
  -675
  -709
  -745
  -782
  -822
  -862
  -906
  -951
  -999
Free cash flow, $m
  603
  632
  661
  692
  724
  757
  792
  828
  866
  905
  852
  894
  939
  986
  1,035
  1,086
  1,139
  1,195
  1,254
  1,315
  1,380
  1,447
  1,518
  1,592
  1,669
  1,750
  1,836
  1,925
  2,019
  2,117
Issuance/(repayment) of debt, $m
  176
  183
  190
  198
  207
  215
  224
  234
  244
  255
  266
  278
  291
  304
  318
  333
  349
  365
  383
  401
  420
  440
  461
  484
  507
  532
  558
  585
  614
  644
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  176
  183
  190
  198
  207
  215
  224
  234
  244
  255
  266
  278
  291
  304
  318
  333
  349
  365
  383
  401
  420
  440
  461
  484
  507
  532
  558
  585
  614
  644
Total cash flow (excl. dividends), $m
  779
  815
  852
  890
  931
  973
  1,016
  1,062
  1,110
  1,160
  1,118
  1,173
  1,230
  1,290
  1,353
  1,419
  1,488
  1,561
  1,637
  1,716
  1,800
  1,887
  1,979
  2,075
  2,176
  2,282
  2,393
  2,510
  2,632
  2,761
Retained Cash Flow (-), $m
  -228
  -239
  -248
  -259
  -269
  -281
  -293
  -305
  -319
  -333
  -347
  -363
  -380
  -397
  -415
  -435
  -455
  -476
  -499
  -523
  -548
  -574
  -602
  -631
  -661
  -693
  -727
  -763
  -800
  -839
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  551
  576
  603
  632
  661
  692
  724
  757
  791
  828
  770
  810
  851
  893
  938
  985
  1,033
  1,084
  1,138
  1,194
  1,252
  1,313
  1,377
  1,445
  1,515
  1,589
  1,666
  1,747
  1,832
  1,921
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  529
  528
  525
  520
  513
  502
  489
  473
  455
  434
  366
  346
  323
  300
  275
  250
  225
  200
  175
  152
  129
  109
  90
  74
  59
  46
  36
  27
  20
  14
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Synopsys, Inc. provides software, intellectual property (IP) and services. The Company supplies the electronic design automation (EDA) software that engineers use to design and test integrated circuits, also known as chips. It also offers IP products, which are pre-designed circuits that engineers use as components of larger chip designs rather than designing those circuits themselves. It provides software and hardware used to develop the electronic systems that incorporate chips and the software that runs on them. It provides technical services to support its solutions and help its customers develop chips and electronic systems. It is also a provider of software tools that developers use to develop software code in a range of industries, including electronics, financial services, energy, and industrials. It offers products and services in four categories: core EDA; IP, Systems and Software Integrity; Manufacturing Solutions, and Professional Services and Other.

FINANCIAL RATIOS  of  Synopsys, Inc. (SNPS)

Valuation Ratios
P/E Ratio 121.1
Price to Sales 6.1
Price to Book 5.1
Price to Tangible Book
Price to Cash Flow 26.1
Price to Free Cash Flow 55
Growth Rates
Sales Growth Rate 12.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 154.2%
Cap. Spend. - 3 Yr. Gr. Rate -7.9%
Financial Strength
Quick Ratio 105
Current Ratio 0
LT Debt to Equity 4.1%
Total Debt to Equity 4.4%
Interest Coverage 56
Management Effectiveness
Return On Assets 2.6%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital 4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.3%
Return On Equity 4.2%
Return On Equity - 3 Yr. Avg. 6.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 76%
Gross Margin - 3 Yr. Avg. 76.8%
EBITDA Margin 21.2%
EBITDA Margin - 3 Yr. Avg. 21.9%
Operating Margin 12.8%
Oper. Margin - 3 Yr. Avg. 12.6%
Pre-Tax Margin 14.1%
Pre-Tax Margin - 3 Yr. Avg. 13.4%
Net Profit Margin 5%
Net Profit Margin - 3 Yr. Avg. 8.7%
Effective Tax Rate 64.2%
Eff/ Tax Rate - 3 Yr. Avg. 34.4%
Payout Ratio 0%

SNPS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SNPS stock intrinsic value calculation we used $3121 million for the last fiscal year's total revenue generated by Synopsys, Inc.. The default revenue input number comes from 0001 income statement of Synopsys, Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our SNPS stock valuation model: a) initial revenue growth rate of 6.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for SNPS is calculated based on our internal credit rating of Synopsys, Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Synopsys, Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of SNPS stock the variable cost ratio is equal to 87.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for SNPS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Synopsys, Inc..

Corporate tax rate of 27% is the nominal tax rate for Synopsys, Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the SNPS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for SNPS are equal to 61%.

Life of production assets of 16.8 years is the average useful life of capital assets used in Synopsys, Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for SNPS is equal to -30.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3479.152 million for Synopsys, Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 148.850 million for Synopsys, Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Synopsys, Inc. at the current share price and the inputted number of shares is $16.4 billion.

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