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Synopsys’ (SNPS) $500M Share Buyback Authorization Restored


Synopsys Inc. SNPS approved an extension of its existing share repurchase authorization to make it worth $500 million again. The initiative reflects the California-based company’s sound financial position and favorable prospects.

Synopsys' board of directors approved the stock repurchase program first in 2002. The decision reflects the company's trend of returning wealth to its shareholders from time to time, depending on market conditions.

Trac Pham, chief financial officer of Synopsys, stated, "We are pleased to be in a position to extend our share repurchase program with this new authorization and will continue to balance return of capital to stockholders, debt reduction and strategic investments to grow the business."

Synopsys’ financial strength allows it to continue with its buyback program. The company exited the last reported quarter (second-quarter fiscal 2017) with cash, cash equivalents and short-term investments of $1.131 billion million compared with $966.3 million at the end of the previous quarter. During the same quarter, cash flow from operational activities was $123 million. The company repurchased $100 million of its common stock during the quarter. The company has a remaining $235 million for its current authorization. The company’s aggressive share repurchase policies are expected to boost investors’ confidence.

In February, the company entered into a fresh accelerated share repurchase agreement (ASR) with Wells Fargo Bank NA. The new ASR agreement is valued at $100 million. Per the agreement, Synopsys will initially receive approximately 1.12 million shares while the remaining shares will be received on or before May 17, 2017, depending on the completion of purchase.

Last words

Synopsys is a vendor of electronic design automation (EDA) software to the semiconductor and electronics industries. We believe the company’s recent product launches, acquisitions and deal wins will boost results, going ahead. Unique intellectual properties and global support provided by the company is likely to drive its forthcoming results. Additionally, the acquisition of Cigital and Codiscope will enable Synopsys to offer a comprehensive software security signoff solution to its customers.

Shares of the company have returned 38.95% in the last one year, outperforming the Zacks Computer-Software industry’s gain of 30%.

Other companies that have a consistent record of returning value through share repurchases and dividend payments are Apple Inc. AAPL, Electronic Arts Inc. EA and Accenture plc ACN.

We believe that apart from enhancing shareholders’ return, these initiatives also raise the market value of the stock. Through dividend payouts, companies bolster investors’ confidence, persuading them to either buy or hold the scrip. Looking ahead, Synopsys remains confident of its growth potential, thereby raising hopes for a further increase in shareholder value through dividend payouts and share buybacks.

However, competition from Cadence Design Systems Inc. and Mentor Graphics Corp., a challenging technology spending environment and uncertainty regarding the exact time of realizing acquisition synergies keep us on the sidelines.

Currently, Synopsys carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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