Synopsys Inc. (NASDAQ:SNPS)

Net Operating Profit After Taxes (NOPAT)

NOPAT shows an overall increasing trend from 2019 through 2024, starting at $489,829 thousand in 2019 and reaching $1,062,721 thousand in 2024. The growth is particularly marked in 2022, where it peaked at $1,357,350 thousand, followed by a decline in 2023 and a recovery in 2024. This indicates increased operational profitability with some volatility in the most recent years.

Cost of Capital

The cost of capital has remained relatively stable, hovering between 15.16% and 15.6% across all periods. There is a slight upward trend from 2019 to 2023, reaching a peak of 15.6% in 2023 before marginally decreasing to 15.59% in 2024. This stability suggests consistent financing costs over the years.

Invested Capital

Invested capital has shown continuous growth over the entire period, increasing from $5,864,612 thousand in 2019 to $10,307,049 thousand in 2024. The increase is steady and significant, indicating ongoing investment in the business’s operational base and assets.

Economic Profit

Economic profit demonstrates considerable fluctuations with mostly negative values except for 2022. It started at a loss of $399,368 thousand in 2019, improving to a lesser loss in 2020 and 2021, before turning positive at $155,311 thousand in 2022. However, it reverted to negative values in 2023 and further declined to -$544,090 thousand in 2024. This pattern suggests that despite improving operational profitability and increasing invested capital, the returns have often failed to exceed the cost of capital, with only one year showing value creation above capital costs.

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.

The analysis of the financial data over the six-year period reveals several notable trends and fluctuations in the company's economic profit, invested capital, and economic spread ratio.

Economic Profit

The economic profit figures demonstrate considerable volatility. Initially, the company experienced negative economic profit, with values of -399,368 thousand US$ in 2019 and -255,204 thousand US$ in 2020, indicating consistent losses. The negative trend continued in 2021 with -278,809 thousand US$, followed by a significant positive turnaround in 2022, reaching 155,311 thousand US$. However, this improvement was short-lived, as the company reported negative economic profits of -369,830 thousand US$ in 2023 and further deteriorated to -544,090 thousand US$ in 2024. This pattern suggests a brief period of economic profit improvement amid an otherwise sustained period of economic losses, with the latest year showing the most pronounced negative economic profit in the series.

Invested Capital

Invested capital has shown a steady and continuous increase throughout the period. Beginning at 5,864,612 thousand US$ in 2019, invested capital increased each year, reaching 10,307,049 thousand US$ by 2024. This upward trend reflects ongoing investment and growth in the capital base of the company, nearly doubling over the analyzed timeframe. The rise in invested capital appears consistent and does not seem to correlate positively with economic profit during the same period.

Economic Spread Ratio

The economic spread ratio, which measures the return on invested capital relative to the cost of capital, followed a largely negative trajectory. From -6.81% in 2019, the ratio improved in 2020 and 2021 to -3.83% and -4.01% respectively, and turned positive in 2022, reaching 2.01%. This positive value coincides with the sole year of positive economic profit. However, the economic spread ratio reverted to negative territory in subsequent years, declining to -4.57% in 2023 and -5.28% in 2024. This pattern aligns with the economic profit trends, highlighting a generally insufficient return on invested capital over most years except for 2022, reflecting challenges in generating adequate economic value relative to capital costs.

In summary, the financial data portrays a company facing ongoing challenges in achieving sustained economic profitability despite significant growth in invested capital. The brief improvement in 2022 across both economic profit and the economic spread ratio was not maintained in subsequent years. The persistent negative economic spread ratios and economic profit losses in most years suggest that the company has struggled to generate returns exceeding its cost of capital, which may warrant further investigation into operational efficiency and capital allocation strategy.

The financial data reveals several significant trends over the analyzed periods. There is a steady increase in adjusted revenue from October 31, 2019, through October 31, 2024, indicating consistent top-line growth for the company. The revenue grew from approximately $3.39 billion in 2019 to nearly $6.15 billion in 2024, reflecting ongoing expansion or increased sales performance.

Despite this revenue growth, economic profit figures show considerable volatility, with several years reflecting negative values. Economic profit, expressed in thousands of US dollars, was severely negative in 2019, improved to a less negative position in 2020 and 2021, then shifted to a positive figure in 2022 before plunging back to a significant loss in 2023 and 2024, reaching its lowest at over half a billion dollars negative in 2024. This pattern suggests fluctuations in profitability that are not directly aligned with revenue growth, possibly due to changes in costs, investments, or other economic factors affecting overall economic profit.

The economic profit margin percentage supports these observations. It started at a negative 11.77% in 2019 and improved up to a positive margin of 2.83% in 2022, indicating profitability during this year. However, the margin then deteriorated sharply again to negative values in 2023 and 2024, reaching -8.85% in the last period. This suggests that while the company achieved a brief period of positive economic profitability, it has struggled to sustain it.

Overall, the data suggests a complex financial environment where revenue growth is consistent, but economic profitability is unstable and currently declining. This indicates challenges in translating sales increases into lasting economic profit, potentially due to rising costs, strategic investments, or other financial pressures impacting margins and net profitability.