A Look At Synopsys (SNPS) Valuation As Premium P/E Meets Moderating Shareholder Returns

Context for Synopsys stock right now

With no single headline event driving Synopsys (SNPS) today, the stock’s recent performance and underlying business profile in chip design software and IP give you the main clues for thinking about its current setup.

See our latest analysis for Synopsys.

The share price at around $519.70 comes after a 1-day share price return of 2.15% and a 7-day share price return of 10.64%. The 1-year total shareholder return of 3.53% contrasts with a 3-year total shareholder return of 55.44%, suggesting momentum has cooled compared with earlier years.

If Synopsys has you thinking about where growth and AI themes could go next, it might be a good time to scan high growth tech and AI stocks for other ideas on your watchlist.

So with Synopsys trading near $519.70, solid recent returns, and revenue and net income growth in the mid teens, is the current price still leaving upside on the table or is the market already pricing in years of future growth?

Most Popular Narrative Narrative: 6.7% Undervalued

With Synopsys last closing at $519.70 and the most followed narrative pointing to fair value around $556.73, the story centers on how future growth and profitability could justify that gap.

The accelerating complexity and proliferation of AI, high-performance computing, and multi-die/chiplet-based architectures are increasing customer demand for Synopsys' advanced design, verification, and simulation solutions, solidifying its role as a mission-critical partner in next-generation chip and system development, supporting both revenue growth and opportunities for higher-margin recurring licensing.

Read the complete narrative.

Curious what kind of revenue run rate and margin profile need to line up to support this fair value, and which future earnings multiple ties it all together? The full narrative spells out those assumptions and the discount rate that pulls everything back to today.

Result: Fair Value of $556.73 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, the picture could shift quickly if export restrictions in China deepen, or if the Ansys integration and headcount cuts weigh more heavily on growth and margins than expected.

Find out about the key risks to this Synopsys narrative.

Another View: What The Current Multiple Is Telling You

Analysts see Synopsys as about 6.7% undervalued relative to their fair value of roughly $556.73, but the market is already paying a P/E of 74.4x. That is well above the estimated fair ratio of 41.8x and above the US Software industry at 32.7x and peers at 61.1x.

In practical terms, you are paying a premium price that leaves less room for disappointment if growth, margins, or sentiment slip from expectations. The open question is whether Synopsys can keep justifying that premium or whether the valuation eventually drifts closer to that fair ratio.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Synopsys Narrative

If this story does not quite fit how you see Synopsys, you can pull up the same data and shape your own view in a few minutes, Do it your way.

A great starting point for your Synopsys research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If Synopsys is on your radar, do not stop there. Broaden your watchlist now so you are not the one hearing about the best ideas after everyone else.

• Spot overlooked value and potential mispricing by scanning these 885 undervalued stocks based on cash flows that might fit the kind of risk and return profile you want in your portfolio.
• Ride the AI trend more intentionally by checking out these 26 AI penny stocks that connect real business models with artificial intelligence themes you care about.
• Position yourself early in emerging tech by reviewing these 29 quantum computing stocks that could benefit if quantum computing moves further into commercial use.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com