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Let's talk about the popular Synopsys, Inc. (NASDAQ:SNPS). The company's shares led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Synopsys’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is Synopsys Still Cheap?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 5.3% below our intrinsic value, which means if you buy Synopsys today, you’d be paying a fair price for it. And if you believe that the stock is really worth $511.89, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Synopsys’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Check out our latest analysis for Synopsys
Can we expect growth from Synopsys?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 80% over the next couple of years, the future seems bright for Synopsys. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? SNPS’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?