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Why Synopsys (SNPS) Might be Well Poised for a Surge
Synopsys (SNPS - Free Report) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
Analysts' growing optimism on the earnings prospects of this maker of software used to test and develop chips is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for Synopsys, as there has been strong agreement among the covering analysts in raising estimates.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $1.93 per share, which is a change of +6.63% from the year-ago reported number.
The Zacks Consensus Estimate for Synopsys has increased 55.43% over the last 30 days, as one estimate has gone higher compared to no negative revisions.
Current-Year Estimate Revisions
The company is expected to earn $8.47 per share for the full year, which represents a change of +23.83% from the prior-year number.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for Synopsys. Over the past month, one estimate has moved higher compared to no negative revisions, helping the consensus estimate increase 11.72%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Synopsys currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
While strong estimate revisions for Synopsys have attracted decent investments and pushed the stock 11.1% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.