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Earnings Estimates Moving Higher for Synopsys (SNPS): Time to Buy?

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Synopsys (SNPS - Free Report) appears an attractive pick given a noticeable improvement in the company's earnings outlook. The stock has been a strong performer lately, and the momentum might continue with analysts still raising their earnings estimates for the company.

The upward trend in estimate revisions for this maker of software used to test and develop chips reflects growing optimism of analysts on its earnings prospects, 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. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

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.

Current-Quarter Estimate Revisions

The earnings estimate of $3.11 per share for the current quarter represents a change of +22.44% from the number reported a year ago.

Over the last 30 days, one estimate has moved higher for Synopsys while two have gone lower. As a result, the Zacks Consensus Estimate has increased 7.44%.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $13.51 per share, representing a year-over-year change of +20.73%.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Synopsys. Over the past month, four estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 16.26%.

Favorable Zacks Rank

The promising estimate revisions have helped Synopsys earn 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.

Bottom Line

Synopsys shares have added 6.6% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.

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