Why ORCL, CRM Could Outperform Synopsys Stock
ORCL, CRM are Synopsys’s peers in Application Software industry that have:
1) Lower valuation (P/OpInc) compared to Synopsys stock
2) But higher revenue and operating income growth
This disconnect between valuation and performance could mean that you are better off buying ORCL, CRM stocks vs. SNPS stock
Single stock can be risky, but there is a huge value to a broader diversified approach we take with Trefis High Quality Portfolio. Should you buy one stock you like or build a portfolio designed to win across cycles? Our numbers show that High Quality Portfolio has turned stock-picking uncertainty into market-beating consistency. This portfolio is incorporated in asset allocation strategy of Empirical Asset Management – a Boston area wealth manager and Trefis partner – whose asset allocation framework yielded positive returns during the 2008-09 period when the S&P lost more than 40%.
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Key Metrics Compared
| Metric | SNPS | ORCL | CRM |
|---|---|---|---|
| P/OpInc* | 65.9x | 41.3x | 29.3x |
| LTM OpInc Growth | -24.8% | 11.8% | 20.6% |
| 3Y Avg OpInc Growth | 0.9% | 7.6% | 1902.2% |
| LTM Revenue Growth | 8.0% | 9.7% | 8.3% |
| 3Y Avg Revenue Growth | 9.7% | 10.2% | 10.5% |
OpInc = Operating Income, P/OpInc = Price To Operating Income Ratio
But do these numbers tell the full story? Read Buy or Sell SNPS Stock to see if Synopsys still has an edge that holds up under the hood. As a quick background, Synopsys (SNPS) provides electronic design automation software and intellectual property solutions for integrated circuits, supporting USB, PCI Express, DDR, Ethernet, SATA, MIPI, HDMI, and Bluetooth low energy applications.
This is just one approach to evaluate investments. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
Is The Mismatch In Stock Price Temporary
One way to check if Synopsys stock is expensive now versus the other tickers would be to see how these metrics compared across companies exactly a year ago. Specifically, if there has been a marked reversal in the trend for Synopsys in the last 12 months, then there is a chance that the current mismatch is likely to reverse. On the other hand, a persistent underperformance in revenue and operating income growth for Synopsys would reinforce the conclusion that the stock is expensive compared to its peers, but may not revert soon
Key Metrics Compared 1 Yr Prior
| Metric | SNPS | ORCL | CRM |
|---|---|---|---|
| P/OpInc* | 58.8x | 26.7x | 34.2x |
| LTM OpInc Growth | -9.1% | 12.3% | 20.2% |
| 3Y Avg OpInc Growth | 6.6% | 5.3% | 475.5% |
| LTM Revenue Growth | 7.5% | 8.4% | 8.0% |
| 3Y Avg Revenue Growth | 9.8% | 10.7% | 11.4% |
OpInc = Operating Income
Additional Metrics To Consider
| Metric | SNPS | ORCL | CRM |
|---|---|---|---|
| P/S | 11.3x | 13.1x | 6.2x |
| Market Cap (Current) | $ 72.8 Bil | $ 770.5 Bil | $ 245.3 Bil |
| LTM Revenue | $ 6.44 Bil | $ 59.02 Bil | $ 39.50 Bil |
| LTM Opinc | $ 1.10 Bil | $ 18.67 Bil | $ 8.38 Bil |
| LTM Op Margin | 17.2% | 31.6% | 21.2% |
OpInc = Operating Income
Alternate buying based on valuation, while attractive, needs to be evaluated carefully from multiple angles. Such multi-factor analysis is exactly how we construct Trefis portfolio strategies. If you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.