QS Research · Michael Burry's Scion Capital analyst template · 2006
SYNOPSYS INC (SNPS)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case -1% · downside -34% · upside +45%
Using section 13's TTM to Jul 31, 2026 base ($9.42B revenue, $2.61B EBITDA, $802.4M EBIT, $2.75B FCF and $8.25B net debt including leases), 35.9x EBITDA gives an EV of $93.7B, equity of $85.4B and about $446/share, roughly -1% from $450.46; 25x EBITDA gives $297 (-34%) and 14.16x sales gives $653 (+45%). The market is not missing the Ansys-led growth: it already pays 9.96x sales, 35.9x EBITDA, 116.9x EBIT, 80.2x P/E and only a 3.2% FCF yield, so there is no deep-value margin of safety. The bull case is real - raised FY2026 guidance, about $2.6B FCF target, $10.9B backlog and Amazon/Nvidia validation - but GAAP operating income compressed, $11.06B debt and $425-500M restructuring make normalized earnings uncertain. Rule not met: base is near flat, downside is worse than -25%, and upside is not capped at +25%, so this is a watch, not a long or short.
Key numbers
- Share price: $450.46
- Market cap: $86.32B
- Latest financial period: TTM to Jul 31, 2026
- Revenue (TTM): $9.42B
- EV / EBITDA (TTM): 35.9x
- P/E (TTM): 80.2x
- Price / book: 2.77x
The 15 boxes
- ✓ 1. Long-form business notes
SNPS sells engineering software, hardware and IP to chip and system designers: FY2025 revenue was $7.05B versus $3.69B in FY2020, with gross profit $5.43B versus $2.89B. The business changed shape between the two 10-Ks: FY2020 was organized as Semiconductor & System Design plus a Software Integrity segment, while FY2025 is Design Automation (EDA, Ansys, Other) plus Design IP, with Ansys folded in and headcount up roughly 40% to about 28,000. FY2025 operating income fell to $914.9M from $1.36B on higher D&A of $660.4M, even as revenue rose, while operating cash flow held at $1.52B. FY2024's $2.26B net income sat above its $1.51B pre-tax income, so that year's net line contains a non-operating/tax benefit and is not the operating run-rate.
- ✓ 2. Competitive advantage
The sources show a scaled, high-gross-profit EDA/IP franchise but not an unqualified wide moat. FY2025 revenue was $7.05B and gross profit $5.43B, yet operating income fell to $914.9M from $1.36B in FY2024, and the 10-K describes EDA as highly competitive with other vendors, customers' internal tools, Chinese state-backed EDA efforts and customer concentration. Patents (>3,800 issued, expiring through 2044) and trade-secret source code are real barriers, but the company says it is not significantly dependent on any single patent, copyright, trademark or license.
- ✓ 3. 10-Q takeaways
Q3 FY2026 (quarter ended 2026-07-31) revenue was $2,476.8 million, up 42% year over year, with Ansys adding $622.2 million from a full quarter versus a partial quarter. Design Automation grew 53% and Design IP 11% in the quarter, while operating income was $357.5 million. Backlog was $10.9 billion at 2026-07-31; costs included heavy Ansys intangible amortization and $236.3 million of nine-month restructuring charges. The excerpt does not cover cash, inventory, buybacks, or guidance.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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