Investors might want to bet on Synopsys (SNPS), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.
Analysts’ growing optimism on the earnings prospects of this maker of software used to test and develop chips is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool — the Zacks Rank — has this insight at its core.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive
externally-audited track record of outperformance
, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for Synopsys, as there has been strong agreement among the covering analysts in raising estimates.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
For the current quarter, the company is expected to earn $2.51 per share, which is a change of +4.58% from the year-ago reported number.
Over the last 30 days, three estimates have moved higher for Synopsys compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 13%.
Current-Year Estimate Revisions
For the full year, the earnings estimate of $10.13 per share represents a change of +13.82% from the year-ago number.
The revisions trend for the current year also appears quite promising for Synopsys, with four estimates moving higher over the past month compared to one negative revision. The consensus estimate has also received a boost over this time frame, increasing 5.52%.
Favorable Zacks Rank
Thanks to promising estimate revisions, Synopsys currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Bottom Line
Synopsys shares have added 18.1% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.
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