Should You Buy Or Sell Synopsys Stock?

December 2nd, 2025 by Trefis Team
SNPS: Synopsys logo
SNPS
Synopsys

Synopsys stock (NASDAQ: SNPS), a leader in electronic design automation (EDA) software and semiconductor intellectual property, just saw its stock surge 11% in a week, following the announcement of a $2 billion equity investment from Nvidia. This investment is strategic, aiming to expand the existing partnership between the two companies to advance AI-powered chip design tools.

Despite the positive news and rally, we believe SNPS stock is currently relatively expensive at its current price of around $440.

Our analysis suggests the stock’s current valuation looks Very High. While there is minimal fundamental cause for concern with Synopsys’s business operations—suggesting a low-risk, high-quality asset—its current price makes it an expensive pick compared to its historical performance and industry peers.

Our conclusion on valuation is based on a comparison of SNPS’s current price with its recent operating performance and financial condition. Synopsys exhibits a Strong operating performance and financial condition across several key parameters, including Profitability and Downturn Resilience.

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Investors should also note a potential legal risk. Several class-action lawsuits have been filed against Synopsys and its executives. These suits allege securities fraud stemming from misleading statements and the failure to disclose material information regarding the economics of its Design IP business segment. While the fundamental performance is strong, this legal uncertainty adds a layer of risk.

That being said, if you seek an upside with less volatility than holding an individual stock like SNPS, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 105% since its inception. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Image by Cristian Ibarra from Pixabay

How Does Synopsys’ Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, SNPS stock looks very expensive compared to the broader market.

  • Synopsys has a price-to-sales (P/S) ratio of 12.8 vs. a figure of 3.2 for the S&P 500
  • Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 63.1 compared to 20.5 for S&P 500
  • And, it has a price-to-earnings (P/E) ratio of 41.1 vs. the benchmark’s 23.5

How Have Synopsys’ Revenues Grown Over Recent Years?

Synopsys’ Revenues have grown marginally over recent years.

  • Synopsys has seen its top line grow at an average rate of 9.7% over the last 3 years (vs. increase of 5.5% for S&P 500)
  • Its revenues have grown 8.0% from $6.0 Bil to $6.4 Bil in the last 12 months (vs. growth of 6.1% for S&P 500)
  • Also, its quarterly revenues grew 14.0% to $1.7 Bil in the most recent quarter from $1.5 Bil a year ago (vs. 7.1% improvement for S&P 500)

How Profitable Is Synopsys?

Synopsys’ profit margins are much higher than most companies in the Trefis coverage universe.

  • Synopsys’ Operating Income over the last four quarters was $1.1 Bil, which represents a moderate Operating Margin of 17.2% (vs. 18.8% for S&P 500)
  • Synopsys’ Operating Cash Flow (OCF) over this period was $1.4 Bil, pointing to a high OCF Margin of 22.4% (vs. 20.5% for the S&P 500)
  • For the last four-quarter period, Synopsys’ Net Income was $2.0 Bil – indicating a considerably high Net Income Margin of 31.0% (vs. 13.1% for S&P 500)

Does Synopsys Look Financially Stable?

Synopsys’ balance sheet looks strong.

  • Synopsys’ Debt figure was $15 Bil at the end of the most recent quarter, while its market capitalization is $70 Bil (as of 12/1/2025). This implies a very strong Debt-to-Equity Ratio of 18.4% (vs. 20.4% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
  • Cash (including cash equivalents) makes up $2.6 Bil of the $48 Bil in Total Assets for Synopsys.  This yields a moderate Cash-to-Assets Ratio of 5.4% (vs. 7.0% for S&P 500)

How Resilient Is SNPS Stock During A Downturn?

SNPS stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on SNPS stock? Our dashboard – Can Synopsys Stock Recover If Markets Fall?  – has a detailed analysis of how the stock performed during and after previous market crashes.

Inflation Shock (2022)

  • SNPS stock fell 30.6% from a high of $375.59 on 27 December 2021 to $260.83 on 11 May 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 10 August 2022
  • Since then, the stock has increased to a high of $645.35 on 30 July 2025 and currently trades at around $440

COVID-19 Pandemic (2020)

  • SNPS stock fell 34.3% from a high of $164.99 on 19 February 2020 to $108.48 on 23 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 20 May 2020

Global Financial Crisis (2008)

  • SNPS stock fell 49.1% from a high of $28.64 on 17 October 2007 to $14.59 on 20 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
  • The stock fully recovered to its pre-Crisis peak by 9 February 2011

Putting All The Pieces Together: What It Means For SNPS Stock

In summary, Synopsys’ performance across the parameters detailed above are as follows:

  • Growth: Moderate
  • Profitability: Strong
  • Financial Stability: Strong
  • Downturn Resilience: Strong
  • Overall: Strong

But given its very high valuation, the stock appears relatively expensive, which supports our conclusion that SNPS is an expensive stock to buy. Also, investing in a single stock without comprehensive analysis can be risky. Consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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