Investors might want to bet on Synopsys (SNPS - Free Report) , as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.
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. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.
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.
For Synopsys, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The company is expected to earn $1.06 per share for the current quarter, which represents a year-over-year change of -1.85%.
Over the last 30 days, one estimate has moved higher for Synopsys compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 19.68%.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $4.25 per share, representing a year-over-year change of +8.7%.
The revisions trend for the current year also appears quite promising for Synopsys, with one estimate moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 22.06%.
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.
While strong estimate revisions for Synopsys have attracted decent investments and pushed the stock 11.9% 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.