Synopsys Inc. (NASDAQ:SNPS)

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates a generally upward trend over the period, rising from approximately 490 million in 2019 to a peak of around 1.36 billion in 2022. However, after reaching this peak, the value declined sharply to roughly 891 million in 2023 before moderately increasing to around 1.06 billion in 2024. This pattern indicates a period of strong profitability growth followed by volatility in recent years.

Cost of Capital

The cost of capital has remained relatively stable, fluctuating slightly within a narrow range of approximately 14.94% to 15.37% during the entire period. This stability suggests consistent financing costs or risk perceptions associated with the invested capital over time.

Invested Capital

Invested capital steadily increased from about 5.86 billion in 2019 to over 10.3 billion in 2024. This indicates significant growth in the capital base, with the largest increment occurring between 2023 and 2024. The steady increase suggests ongoing investments or asset accumulation supporting the company's operations or expansion strategies.

Economic Profit

The economic profit values reveal persistent negative performance in creating value above the cost of capital, with negative amounts recorded in all years except 2022. The highest economic profit was achieved in 2022, coinciding with the peak NOPAT, where a positive figure of approximately 173 million was observed. However, in other years, the company experienced substantial economic losses, with the largest negative figures noted in 2024 and 2019. This indicates that despite increases in net operating profit and invested capital, the returns have generally not exceeded the required cost of capital apart from 2022.

Summary

The overall financial analysis reveals a company experiencing growth in net operating profit and capital investment over the years, contrasted by a largely negative economic profit performance. The brief positive economic profit in 2022 suggests some operational efficiency or market conditions allowed value creation beyond capital costs, but this was not sustained. Stable cost of capital implies consistent risk assessment or financing structure. The disparity between rising invested capital and negative economic profit in most years may warrant further examination into capital allocation efficiency and return generation.

The financial data reveals notable trends in profitability measures over the six-year period ending October 31, 2024. Both net income attributable to the company and net operating profit after taxes (NOPAT) exhibit overall growth, albeit with differing patterns across the years.

Net Income Attributed to the Company

This metric demonstrates a consistent year-over-year increase from 2019 through 2024. Starting at approximately $532 million in 2019, net income rose steadily each year, reaching about $2.26 billion by 2024. This represents a more than fourfold increase over the six-year span, indicating substantial growth in bottom-line profitability.

Net Operating Profit After Taxes (NOPAT)

NOPAT generally maintains an upward trend but reflects more volatility compared to net income. Beginning at roughly $490 million in 2019, NOPAT nearly doubles by 2020 to $774 million, followed by a modest increase in 2021. In 2022, there is a significant jump to approximately $1.36 billion, likely reflecting improved operating efficiency or operational scale. However, in 2023, NOPAT decreases sharply to about $891 million before partially recovering to $1.06 billion in 2024. This fluctuation suggests changes in operating performance or tax impacts that merit further investigation.

Overall, net income growth appears robust and consistently positive, signaling strong profitability and potentially effective cost management or revenue expansion. Meanwhile, the variations in NOPAT highlight some potential operational challenges or one-time adjustments impacting operating earnings during the period, especially in the last two years.

Provision (Benefit) for Income Taxes

The provision for income taxes showed considerable volatility over the six-year period under review. Initially, there was a benefit recorded in 2020, reflected by a negative provision of approximately -25.3 million USD, following a provision of around 13.1 million USD in 2019. This was succeeded by a significant increase in the provision, reaching 49.2 million USD in 2021 and further rising sharply to 137.1 million USD in 2022. Subsequently, the provision decreased to 83.7 million USD in 2023 and showed a slight increase again to approximately 99.7 million USD in 2024. The fluctuations suggest varying tax strategies or changes in taxable income and tax rates over the years.

Cash Operating Taxes

Cash operating taxes exhibited a steady and substantial upward trend throughout the period. Starting from 96.8 million USD in 2019, there was a slight decline to 89.4 million USD in 2020, followed by a marked increase to 180.3 million USD in 2021. This upward trajectory continued with a slight reduction to 175.5 million USD in 2022, then a significant surge to 290.8 million USD in 2023, and further escalation to 473.0 million USD in 2024. The increasing cash outflows for operating taxes indicate higher taxable earnings or changes in tax payment policies, highlighting growing tax expenses in actual cash terms.

The financial data presents a multi-year view of key capital structure components, including total reported debt and leases, total stockholders' equity, and invested capital. The trends reflect notable developments in the company's financing and capitalization over the examined periods.

Total reported debt & leases

The total reported debt and leases exhibit a generally stable trend with minor fluctuations. Starting from approximately $760 million in 2019, the figure decreased to around $663 million in 2020 before slightly rising and then fluctuating marginally between $656 million and $688 million in subsequent years. By 2024, the debt level registers at about $684 million, indicating a relatively consistent leverage position without significant volatility or large changes in debt financing.

Total stockholders’ equity

The total stockholders’ equity demonstrates a strong upward trajectory across the years. Commencing at roughly $4.08 billion in 2019, equity increased steadily each year, reaching about $9 billion by 2024. This nearly doubles the equity base over the time frame, highlighting substantial growth in the company's net worth and potentially reflecting retained earnings, issuance of new equity, or appreciation in asset values. The consistent increase in equity suggests an improving financial foundation and possibly enhanced investor confidence.

Invested capital

Invested capital also follows an upward trend, beginning at approximately $5.86 billion in 2019 and increasing annually to surpass $10.3 billion by 2024. This indicates an expansion in the total capital employed in the business, combining equity and debt components. The growth in invested capital exceeds that of debt, aligning with the observed equity increases and suggesting that the company has been funding growth primarily through internal resources or equity financing rather than markedly increasing debt levels.

Overall, the company’s capital structure reveals disciplined management of debt with a stable leverage profile, alongside robust and steady growth in equity and invested capital. This pattern indicates a strengthening financial position supported by increased shareholder investment and a growing asset base.

Economic Profit

The economic profit exhibits significant volatility over the observed period. Initially, there is a notable negative economic profit in 2019 at -386,233 thousand USD, which improves by 2020 to -240,028 thousand USD. However, in 2021, the economic profit declines again to -262,883 thousand USD. A positive economic profit is recorded in 2022 at 173,043 thousand USD, indicating a temporary recovery. This positive trend does not persist, as economic profit sharply declines in the following years, reaching -351,220 thousand USD in 2023 and further deteriorating to -520,386 thousand USD in 2024, representing the lowest point in the given timeframe.

Invested Capital

Invested capital shows a consistent upward trend throughout the entire period. Starting at 5,864,612 thousand USD in 2019, it increases steadily each year to 6,656,460 thousand USD in 2020, 6,945,230 thousand USD in 2021, 7,739,574 thousand USD in 2022, and 8,083,758 thousand USD in 2023. The most substantial increase occurs in 2024, where invested capital rises sharply to 10,307,049 thousand USD, indicating a significant expansion or additional investments during that period.

Economic Spread Ratio

The economic spread ratio reflects a fluctuating trend, mostly negative throughout the observed years. It starts at -6.59% in 2019, improving to -3.61% in 2020, which suggests a reduction in negative spread. However, there is a slight decline in 2021 to -3.79%. A positive spread ratio is observed in 2022 at 2.24%, corresponding to the positive economic profit in that year and indicating value creation. Nonetheless, this positive interval is short-lived, as the spread ratio returns to negative figures in subsequent years: -4.34% in 2023 and further declining to -5.05% in 2024, implying diminishing returns on invested capital during these periods.

Adjusted Revenue

The adjusted revenue demonstrates a consistent upward trend over the six-year period, increasing from approximately 3.39 billion US dollars in 2019 to about 6.15 billion US dollars in 2024. This shows a steady expansion in the company's core business income, with notable acceleration between 2020 and 2023.

Economic Profit

Economic profit exhibits significant volatility. Starting with a negative value of approximately -386 million US dollars in 2019, it improved to around -240 million in 2020 and remained negative at about -263 million in 2021. A notable positive shift occurs in 2022, with economic profit rising to 173 million US dollars, indicating a period of economic value generation. However, this improvement was short-lived, as the economic profit declined sharply again in 2023 and 2024, reaching negative values of approximately -351 million and -520 million US dollars, respectively.

Economic Profit Margin

The economic profit margin reflects a pattern consistent with the economic profit values. It starts at -11.38% in 2019, improves gradually to -6.02% in 2021, and turns positive at 3.15% in 2022, suggesting a temporary enhancement in profitability relative to revenue. Nonetheless, the margin deteriorates once more in the following years, returning to negative territory with -6.13% in 2023 and further declining to -8.46% in 2024.

Summary of Trends

Overall, adjusted revenue has steadily increased over the analyzed timeframe, indicating robust top-line growth. In contrast, the economic profit and its margin exhibit considerable fluctuations, with a brief period of economic profitability in 2022 followed by a reversion to substantial economic losses. This disparity suggests that despite growing revenues, the company has faced challenges in sustaining economic profitability, potentially related to rising costs, investments, or changes in operational efficiency during the latter years.