DCF Studio

    SNPS · NMS · Technology

    Synopsys, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 85.48

    Market price

    USD 384.97

    Implied upside

    -77.8%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages 2.82% of revenue against depreciation and amortisation of 5.94%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 5.94% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Current EV/EBITDA of 54.0x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 85.48-77.8%
    Exit multiple
    USD 265.51-31.0%
    Market price
    USD 384.97

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 8.1bnUSD 9.4bnUSD 10.8bnUSD 12.4bnUSD 14.3bn+15.2%
    EBITUSD 1.7bnUSD 2.0bnUSD 2.3bnUSD 2.6bnUSD 3.0bn+15.2%
    NOPATUSD 1.6bnUSD 1.9bnUSD 2.1bnUSD 2.5bnUSD 2.8bn+15.2%
    Add depreciation & amortisationUSD 482.9mUSD 556.3mUSD 640.7mUSD 738.0mUSD 850.1m+15.2%
    Less capital expenditureUSD -482.9mUSD -556.3mUSD -640.7mUSD -738.0mUSD -850.1m+15.2%
    Less increase in working capitalUSD -574.1mUSD -661.2mUSD -761.7mUSD -877.3mUSD -1.0bn+15.2%
    Free cashflow to firmUSD 1.0bnUSD 1.2bnUSD 1.4bnUSD 1.6bnUSD 1.8bn+15.2%
    Discount factor0.95170.86210.78090.70740.6407-
    Present valueUSD 989.1mUSD 1.0bnUSD 1.1bnUSD 1.1bnUSD 1.2bn+4.3%
    Present Value Of The ForecastUSD 5.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.152Reported 1.227, pulled toward 1.0 (Blume)
    Cost of equity11.33%Risk-free + beta x equity risk premium
    Cost of debt5.97%Interest expense / average total debt
    Market capitalisationUSD 73.8bn83.8% of capital
    Total debtUSD 14.3bn16.2% of capital, book value as a proxy
    Tax rate6.7%Effective, capped at statutory
    WACC10.40%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 85.48

    79% of EV

    Forecast FCFF, final year
    USD 1.8bn
    Capex at depreciation, working capital in reinvestment
    USD 2.8bn
    Less reinvestment at g/ROIC (14.9% of NOPAT)
    USD -423.0m
    Capitalised
    USD 2.4bn
    ROIC (reported)
    16.8%
    Terminal value, undiscounted
    USD 31.4bn
    Terminal value, discounted
    USD 20.1bn
    Enterprise value
    USD 25.5bn
    Less net debt
    USD 11.3bn
    Equity value
    USD 14.2bn

    Exit at 20.0x EBITDA

    Value per shareUSD 265.51

    90% of EV

    Terminal value, undiscounted
    USD 77.9bn
    Terminal value, discounted
    USD 49.9bn
    Enterprise value
    USD 55.3bn
    Less net debt
    USD 11.3bn
    Equity value
    USD 44.0bn

    Spread between methods: 103%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.40%125.56133.23142.15152.65165.23
    9.40%98.86103.92109.66116.24123.89
    10.40%78.2681.6885.4889.7694.61
    11.40%61.9164.2566.8269.6672.81
    12.40%48.6250.2451.9953.8955.97

    Outlined: this model. Green text: above today's price of 384.97. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year15.2%49.0%+33.9pp
    EBIT margin21.3%58.4%+37.1pp
    Discount rate10.4%5.3%-5.1pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.