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Here's How Much You'd Have If You Invested $1000 in Synopsys a Decade Ago

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How much a stock's price changes over time is important for most investors, since price performance can both impact your investment portfolio and help you compare investment results across sectors and industries.

Another thing that can drive investing is the fear of missing out, or FOMO. This particularly applies to tech giants and popular consumer-facing stocks.

What if you'd invested in Synopsys (SNPS - Free Report) ten years ago? It may not have been easy to hold on to SNPS for all that time, but if you did, how much would your investment be worth today?

Synopsys' Business In-Depth

With that in mind, let's take a look at Synopsys' main business drivers.

Synopsys is a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries. The company offers a full suite of products used in the logic synthesis and functional verification phases of chip design, including a broad array of reusable design building blocks. It also sells physical synthesis and physical design products as well as physical verification products.

The company’s products are used to design a chip, from concept to the point of delivery to the manufacturer for fabrication. Synopsis provides software and hardware, which are used to develop electronic systems that incorporate chips. Additionally, the company provides Intellectual Property (IP) used in semiconductor design and manufacturing to simplify the design process and accelerate time-to-market for its customers.

Synopsis reports revenues in three segments, namely Time-Based Products, Upfront Products and Maintenance and Service.

Time-Based Products (59% of fiscal 2022 revenues): Segment revenues are recognized as Technology Subscription License (TSL) revenues. Under this segment, the company recognizes revenues from fees over the period of the license or as and when the installments are paid by the customer, whichever is later.

Upfront Products (24%): These revenues are recognized as Term License revenues. Under this segment, the company recognizes revenues from term licenses in full after the completion of the shipment of the software, wherein at least 75% of the license fee is paid within a year of shipment, after fulfilling all other revenue recognition criteria.

Maintenance and Service (17%): Under this segment revenues come from maintenance fees that are generated over the maintenance period; along with revenues generated from professional service and training fees.

The company conducts its business across four geographic regions namely: North America (47% of fiscal 2022 revenues), China (16%), Europe (10%), Korea (10%) and others (17%).

Synopsys’ competitors include EDA vendors like Cadence Design Systems Inc. and Mentor Graphics Corporation.

Bottom Line

Anyone can invest, but building a successful investment portfolio takes a combination of a few things: research, patience, and a little bit of risk. So, if you had invested in Synopsys a decade ago, you're probably feeling pretty good about your investment today.

According to our calculations, a $1000 investment made in March 2013 would be worth $10,565.23, or a 956.52% gain, as of March 20, 2023. Investors should keep in mind that this return excludes dividends but includes price appreciation.

In comparison, the S&P 500 gained 150.95% and the price of gold went up 18.28% over the same time frame.

Looking ahead, analysts are expecting more upside for SNPS.

Synopsys is benefiting from strong design wins owing to a robust product portfolio. Growth in hybrid working trend is driving demand for bandwidth. Strong traction for Synopsys’ Fusion Compiler product boosted the top line. Growing demand for advanced technology, design, IP and security solutions is also creating solid prospects. Rising impact of artificial intelligence, 5G, internet of things and big data is driving investments in new compute and machine learning architectures. Our estimates suggest that Synopsys’ revenues will grow at a CAGR of 9.8% through 2023-2025. However, tightening corporate budget amid ongoing macroeconomic challenges and unfavorable currency exchange rates might hurt the company’s near-term growth prospect. Geopolitical challenges and restrictions over trade with Huawei are other woes.

Over the past four weeks, shares have rallied 5.10%, and there have been 8 higher earnings estimate revisions in the past two months for fiscal 2023 compared to none lower. The consensus estimate has moved up as well.

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