Synopsys (SNPS:NAS) Fundamental Valuation Report

Fundamental Valuation Report



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Close Price/Date
$84.12 (USD) 19/12/2018

Weighted Valuation
$94.43 (USD)

Overall Rating
Undervalued by 12.3%

Valuation Models Analyst Consensus: $111.75 (USD)
(in order of importance) Discounted Cash Flow: $82.17 (USD)
Comparables: $66.99 (USD)
Valuation Methods This company is:
Cash Flow: Fairly valued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (SNPS:NAS USD)

Price 84.12
Range 83.18 – 86.50
52 week 80.77 – 102.81
Open 85.36
Vol / Avg. 1.7M/1.5M
Mkt cap 12.58B
P/E 261.11
Div/yield 0.00/0.00
EPS 2.82
Shares 149.52M
Beta 1.28

Company Description

Synopsys Inc is a provider of electronic design automation software and intellectual property products to designers, engineers, and developers. The software enables designers to automate the integrated circuit design process and reduce errors, and verify that the design behaves as intended. Its intellectual property products include solutions for wired and wireless interfaces, logic libraries and embedded memories, and configurable processor cores. The firm derives revenue from the sale of software licenses, as well as from maintenance and professional fees. Roughly half of the firm’s revenue is generated in the United States, with the rest coming from Europe, Japan, and the Asia-Pacific region.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for SNPS:NAS

Using a discounted cash flow model we generated an intrinsic value of $82.17 (USD) for SNPS:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

SNPS:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $82.17 1% 5% 1% 5%
WACC (or Ke) 9.70 $97.08 $71.14
Terminal Growth Rate 3.00 $72.35 $95.44
Tax Rate -0.19 $85.94 $78.40
Cash Flow 875,945,248 $77.49 $86.86
Capital Expenditures -84,958,200 $81.81 $82.53
Long Term Debt 277,500,000 $82.27 $82.08

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $66.99 (USD) for SNPS:NAS. We also generated a valuation of $102.09 (USD) using other metrics and comparables.
The comparable companies were Akamai Technologies (AKAM:NAS), Ansys (ANSS:NAS), Aspen Technology (AZPN:NAS), Cadence Design Systems (CDNS:NAS) and National Instruments (NATI:NAS).

Company SNPS:NAS End Date Value
Earnings/Share $2.82 (USD)
Book Value/Share $21.16 (USD)
Sales/Share $19.68 (USD)
Cash Flow/Share $3.11 (USD)
EBITDA/Share $3.84 (USD)
Price Based on Comps Adjustment Factor (%)
$158.83 (USD) -52.1
$157.81 (USD) -62.6
$157.52 (USD) -20.6
$71.87 (USD) -69.6
$95.86 (USD) -44.0
241.95 PE Ratio 56.32 51.69 43.91 42.72 54.27 89.02
4.35 PB Ratio 7.46 3.55 5.31 12.91 10.11 5.42
4.67 PS Ratio 8.01 4.39 11.83 12.85 6.13 4.82
29.54 PCF Ratio 24.08 12.76 30.57 31.29 21.15 24.62
21.95 EV to EBITDA 24.99 15.30 27.70 31.35 25.61 25.01


Using a multiples approach we generated a valuation of  $69.13 (USD) for SNPS:NAS

Company SNPS:NAS End Date Value
Earnings/Share $2.82 (USD)
Book Value/Share $21.16 (USD)
Sales/Share $19.68 (USD)
Cash Flow/Share $3.11 (USD)
EBITDA/Share $3.84 (USD)
Price Based on Comps Adjustment Factor
$96.15 (USD) 0
$59.73 (USD) 0
$78.25 (USD) 0
$50.46 (USD) 0
$61.04 (USD) 0
Ratios Ratio Average
PE Ratio 34.10
PB Ratio 2.82
PS Ratio 3.98
PCF Ratio 16.21
EV to EBITDA 15.91

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  SNPS:NAS for the last 10 years was  2.78

We ran the Adjusted Book Value for  SNPS:NAS and generated a book value of  $23.31 (USD)
By multiplying these we get an adjusted valuation of  $64.90 (USD)

Analyst Data

In the Stockcalc database there are 4 analysts that provide a valuation for SNPS:NAS. The 4 analysts have a concensus valuation for SNPS:NAS for 2019 of $111.75 (USD).

SNPS:NAS Synopsys

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
4 0 0 5.0000 Buy 2018-12-18

Current Price: 84.12 USD

Analyst Consensus
USD Millions 2019 2020
Mean EPS 4.24 4.89
# EPS Analysts 3 2
Mean Revenue 3,310.00 3,517.00
# Revenue Analysts 3 2
Mean Target Price 111.75
Mean Cash Flow 4.64
Mean EBITDA 687.20
Mean Net Income 590.90 393.80
Mean Debt Outstanding 12.90
Mean Tax Rate 18.50 18.00
Mean Growth Rate 10.00
Mean Capital Expenditure 270.00

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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