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Synopsys (SNPS) to Boost Shareholder Wealth With New ASR Pact

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Continuing with its efforts to enhance shareholder value, Synopsys Inc. (SNPS - Free Report) , yesterday, announced that it is set to buy back $250 million worth of the company’s common stocks under an accelerated share repurchase (ASR) program. This initiative reflects the California-based company’s sound financial position and favorable prospects.

The company announced an agreement with Mizuho Markets Americas LLC in this connection. Per the agreement, Synopsys will initially receive approximately 824,000 shares, while the remaining shares will be received on or before Apr 9, 2021, depending on the completion of purchase. The number of shares to be repurchased will be calculated on the basis of Synopsys’ daily volume weighted average share price during the stated period, after adjusting for a discount.

Notably, the stock-repurchase program has been in effect since 2002. During the second-quarter fiscal 2020 earnings call, Synopsys had announced that it has returned approximately $2 billion since 2015, which is nearly 75% of the company’s free cash flow. In fiscal 2020, Synopsys repurchased stock worth $242 million.

Synopsys’ financial strength enables it to continue with the buyback program. As of Oct 31, 2020, the company’s cash and cash equivalents totaled $1.24 billion. Its aggressive share-repurchase policies are anticipated to boost investor confidence. Synopsys’ strategy to return wealth to shareholders highlights its growth potential and stable liquidity position.

We believe, apart from strategic investments, continued focus on such shareholder-friendly initiatives will further boost the company’s shares. Remarkably, Synopsys has rallied 74.3% in the year so far, outperforming the 31.9% gain of the industry it belongs to.

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

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

Currently, Synopsys carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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