Synopsys Inc. (NASDAQ:SNPS) recently announced that its board of directors has replenished its ongoing share repurchase program to its limit of $500 million.
Notably, the stock repurchase program has been in effect since 2002 and the allotted capital has been refilled depending on the availability of funds. However, Synopsys is not obligated to buy back any specific number of shares and the program may be terminated depending on the company’s decision.
In fiscal 2017, Synopsys repurchased stock worth $380 million. At the end of fiscal 2017, the company had $400 million remaining under its share repurchase authorization of $500 million. In the first quarter of fiscal 2018, the company bought back $180 million worth of its common stock, following which the fund was refilled.
According to the company, accelerated share repurchase (ASR) arrangements are an integral part of its overall efforts to enhance investors’ worth. In fiscal 2017, the company either initiated or completed $325 million worth of ASR. Prior to that, in December 2015, it initiated a $200 million ASR program while in December 2014, it started a $180 million ASR program that was completed in the third quarter of fiscal 2015.
We believe that apart from strategic investments, the company’s continuous focus on such shareholder-friendly initiatives will help the company’s shares rebound going forward. Notably, Synopsys has rallied 16.1% over the past year, underperforming the 30.4% surge of the industry it belongs to.
Additionally, the company’s raised fiscal 2018 guidance is encouraging. The company’s recent acquisitions of Black Duck Software and Kilopass Technology are expected to boost the top line in the long run. Moreover, the acquisition of Cigital and Codiscope will enable Synopsys to offer a comprehensive software security signoff solution to consumers.
However, escalating costs and expenses, which have been dampening margins, remain headwinds. Additionally, uncertainty regarding the exact time of realizing acquisition synergies and heightening competition from the likes of Cadence Design Systems Inc. (NASDAQ:CDNS) and Mentor Graphics are other concerns.
Zacks Rank and Stocks to Consider
Currently, Synopsys carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are NVIDIA Corporation (NASDAQ:NVDA) and Western Digital Corporation (NASDAQ:WDC) , both sporting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NVIDIA and Western Digital have long-term expected EPS growth rates of 10.3% and 19%, respectively.
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