Is it time to put Synopsys (NASDAQ: SNPS) on your watchlist?

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Some have more money than common sense, they say, so even businesses with no income, no profit, and a record of failure can easily find investors. And in their study entitled Who is the prey of the Wolf of Wall Street? ‘ Leuz and. Al have found that it is “quite common” for investors to lose money by purchasing “pump and dump” programs.

Contrary to all this, I prefer to spend time on companies like Synopsis (NASDAQ: SNPS), which not only has revenue, but also profits. Now, I’m not saying the stock is necessarily undervalued today; but I cannot shake the appreciation of the profitability of the company itself. In comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when in a hurry.

See our latest review for Synopsys

Improving Synopsys Profits

Over the past three years, Synopsys has increased its earnings per share (EPS) like a young bamboo after the rain; fast, and from a low base. So I don’t think the percentage growth rate is particularly significant. So it makes sense to focus on more recent growth rates instead. Like a firecracker in the night sky, Synopsys’ EPS has gone from US $ 3.16 to US $ 5.31 in the past year. You don’t see 68% year-over-year growth like that, very often.

I like to look at earnings before interest and tax margins (EBIT), as well as revenue growth, to get another idea of ​​how well the business is growing. The good news is that Synopsys is increasing revenue and its EBIT margins have improved 2.8 percentage points to 19% over the past year. Checking those two boxes is a good sign of growth in my book.

You can check out the revenue and profit growth trend of the company in the chart below. To see the actual numbers, click on the graph.

NasdaqGS: SNPS Revenue and Revenue History August 8, 2021

The trick, as an investor, is to find companies that go to perform well in the future, not just in the past. To that end, now and today you can check out our visualization of consensus analysts’ forecasts for future 100% free EPS Synopsys.

Are Synopsys Insiders Aligned with All Shareholders?

Given that Synopsys has a market cap of US $ 45 billion, we don’t expect insiders to own a significant percentage of stocks. But we are reassured by the fact that they are investors in the company. Indeed, they have invested a sparkling mountain of wealth, currently valued at US $ 277 million. This suggests to me that management will be very attentive to the interests of shareholders when making a decision!

It’s good to see insiders invested in the company, but are the pay levels reasonable? Well, based on CEO pay, I would say they are indeed. I found that the median total compensation of CEOs of companies like Synopsys, with market caps over $ 8.0 billion, is around $ 11 million.

Synopsys offered total compensation worth $ 6.8 million to its CEO during the year at. This is lower than the average for similar sized companies and seems pretty reasonable to me. Although the level of CEO compensation is not a big factor in my view of the company, modest compensation is positive, as it suggests that the board has the interests of shareholders in mind. It can also be a sign of a culture of integrity, in the broad sense.

Is Synopsys worth watching?

Synopsys earnings per share took off like a rocket pointed straight at the moon. The sweetener is that insiders have a mountain of stocks, and the CEO’s pay is totally reasonable. The strong increase in profits could be a sign of good business momentum. Synopsys certainly ticks a few of my boxes, so I think it probably deserves a closer look. If you think Synopsys might suit your investing style, you can go straight to their annual report, or you can check out our discounted cash flow (DCF) assessment for the company first.

While Synopsys certainly looks good to me, I would like more insiders to buy stocks. If you also like to see insiders buy, then this free list of growing companies that insiders are buying, might be exactly what you are looking for.

Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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