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Synopsys to Boost Shareholder Return With New ASR Agreement

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Continuing with its efforts to enhance shareholder value, Synopsys Inc. (SNPS - Free Report) last week announced that it is set to buy back $200 million worth of its common stocks under an accelerated share repurchase (ASR) program. This initiative reflects the California-based company’s sound financial position and favorable prospects.

Last Thursday, the company announced an agreement with JPMorgan Chase Bank, National Association and MUFG Securities EMEA plc in this connection. Per the agreement, Synopsys will initially receive approximately 1.8 million shares, while the remaining shares will be received on or before May 16, 2018, depending on the completion of purchase. The number of shares to be repurchased will be calculated on the basis of Synopsys’ volume weighted average share price during the stated period, after adjusting for a discount.

ASR arrangements are an integral element of the company’s overall framework for enhancing investors’ worth. Since fiscal 2015, the company has completed $705 million worth of ASR program.

Apart from the ASR agreements, the company has also repurchased its common stock from the open market. In June 2017, Synopsys approved an extension of the company’s existing share-repurchase authorization to make it worth $500 million again. In fiscal 2017, it has repurchased $400 million worth of common stock.

Synopsys’ financial strength enables it to continue with the buyback program. As of Oct 31, 2017, the company’s cash, cash equivalents and short-term investments were $1.05 billion. Its aggressive share-repurchase policies are anticipated to boost investors’ confidence. Synopsys’ strategy to return wealth to shareholders highlights its growth potential and stable liquidity position.

Notably, in the year-to-date period, the stock has outperformed the industry to which it belongs to. Synopsys has returned 53.8% during the said time period, while the industry has gained 35.3%.



Other companies that have a consistent record of returning value through share repurchases and dividend payments are Apple Inc. (AAPL - Free Report) and Electronic Arts Inc. (EA - Free Report) .

We believe apart from enhancing shareholders’ return, these initiatives also raise the market value of the stock. Through share repurchases and dividend payouts, companies boost investors’ confidence, persuading them to either buy or hold the scrip.

Nonetheless, the company’s escalating costs and expenses, which are thwarting margins, make us increasingly cautious about its near-term profitability.

Currently, Synopsys carries a Zacks Rank #5 (Strong Sell).

A better-ranked stock in the same industry space is Adobe Systems Incorporated (ADBE - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term expected EPS growth rate for Adobe is currently pegged at 17%.

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