Synopsys Inc. (NASDAQ:SNPS)

The financial data reveals several notable trends and variations across the analyzed period. The net operating profit after taxes (NOPAT) showed a general upward trend from 2019 through 2022, increasing from 489,829 thousand US dollars in 2019 to a peak of 1,357,350 thousand US dollars in 2022. However, this figure declined in 2023 to 891,268 thousand US dollars before rising again in 2024 to 1,062,721 thousand US dollars, indicating some volatility in profit generation during the most recent years.

Cost of capital remained relatively stable over the six-year period, maintaining a rate around 15.1% to 15.6%. This consistency suggests that the company's risk profile and capital cost environment did not significantly change, providing a steady benchmark for evaluating invested capital and economic profit.

Invested capital increased steadily over the years, from 5,864,612 thousand US dollars in 2019 to 10,307,049 thousand US dollars in 2024. The growth in invested capital was especially pronounced between 2023 and 2024, reflecting a substantial increase in resource deployment which may reflect expansion, acquisitions, or significant capital expenditures.

The economic profit, which measures the company's value creation above its cost of capital, showed more fluctuation. It was negative in most periods except in 2022, where a positive economic profit of 158,644 thousand US dollars was recorded. In other years, economic profit remained negative, with the largest losses recorded in 2019 (-396,899 thousand US dollars), 2023 (-366,332 thousand US dollars), and further worsening in 2024 (-539,635 thousand US dollars). This pattern suggests that despite growing invested capital and periods of increased NOPAT, the company struggled to surpass the cost of capital consistently, indicating potential inefficiencies or challenges in generating sufficient returns from investments.

In summary, while operational profitability increased over the period with some fluctuations, the company's economic profit indicates challenges in achieving sustained value creation relative to the cost of capital. The steep increase in invested capital alongside negative economic profits in recent years warrants attention to the effectiveness of capital allocation and the returns generated from these investments.

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 financial data presents notable fluctuations in economic profit, invested capital, and economic spread ratio over the six-year period ending October 31, 2024.

Economic Profit

Economic profit demonstrates significant volatility throughout the timeline. It started with a substantial negative value of approximately -$397 million in 2019, showing some improvement to around -$252 million in 2020. However, it dipped slightly to -$276 million in 2021. A marked turnaround occurred in 2022, resulting in a positive economic profit of about $159 million. This temporary improvement reversed in subsequent years, with economic profit declining sharply to approximately -$366 million in 2023 and further down to nearly -$540 million by 2024. This pattern suggests challenges in generating consistent economic profitability despite brief periods of positive performance.

Invested Capital

Invested capital exhibited a steady upward trend throughout the period. Beginning at roughly $5.86 billion in 2019, it increased each year to reach over $10.3 billion by 2024. The rate of growth appears consistent, suggesting ongoing investment or asset accumulation by the company, indicating expansion or increased operational scale over time.

Economic Spread Ratio

The economic spread ratio, representing the difference between the company's return on invested capital and its cost of capital, generally mirrors the trends observed in economic profit. It commenced at -6.77% in 2019 and improved to -3.79% in 2020, followed by a slight deterioration to -3.97% in 2021. A positive economic spread of 2.05% was recorded in 2022, coinciding with the period of positive economic profit. However, similar to economic profit, the ratio turned negative again in the subsequent years, registering -4.53% in 2023 and further declining to -5.24% in 2024. This suggests that the company has mostly been unable to generate returns surpassing its cost of capital, except for the brief improvement in 2022.

The financial data demonstrates varying trends in the economic profit, adjusted revenue, and economic profit margin over a six-year period ending October 31, 2024. The analysis explores these metrics in detail to provide insights into the company's financial performance and profitability trends.

Adjusted Revenue

The adjusted revenue shows a consistent upward trend over the entire period. Starting at approximately US$3.39 billion in 2019, revenue increased steadily each year, reaching around US$6.15 billion by 2024. This indicates strong growth in sales or service income year-over-year, nearly doubling from 2019 to 2024.

Economic Profit

Economic profit figures reveal a more volatile pattern. From 2019 to 2021, the company experienced negative economic profit, though the losses decreased from -US$396.9 million in 2019 to -US$252.4 million in 2020, then widened slightly to -US$275.8 million in 2021. In 2022, there was a notable positive turnaround to US$158.6 million, indicating a period of profitability beyond the cost of capital. However, this profitability was not sustained, as economic profit plunged back into significant negative territory in 2023 (-US$366.3 million) and further deteriorated in 2024 to -US$539.6 million. This suggests rising costs, decreased operational efficiency, or increased capital charges impacting net value creation.

Economic Profit Margin

The economic profit margin closely mirrors the trend in economic profit. It started at a negative 11.7% in 2019, improving considerably by 2020 to -6.51%, and remaining roughly stable in 2021 at -6.32%. In 2022, the margin turned positive at 2.89%, reflecting the year when economic profit turned positive. Nevertheless, the margin declined again into negative territory with -6.39% in 2023 and further down to -8.77% in 2024. This demonstrates fluctuating profitability relative to revenue, with a brief improvement that was not maintained in the subsequent years.

In summary, the company achieved continuous revenue growth over the six years but struggled to convert this top-line growth into sustainable positive economic profit. The year 2022 marked a temporary recovery in profitability; however, economic profit and margin worsened significantly in the last two years. This pattern suggests challenges in controlling costs or capital expenses relative to revenue, requiring further strategic attention to enhance long-term value creation.