Synopsys Inc. (NASDAQ:SNPS)

The financial data shows notable variations in key performance indicators over the six-year period under review.

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates a generally positive trend with some fluctuations. It increased substantially from 489,829 thousand USD in 2019 to a peak of 1,357,350 thousand USD in 2022. However, it experienced a sharp decline in 2023 to 891,268 thousand USD before recovering somewhat to 1,062,721 thousand USD in 2024. This indicates varying operational profitability with a strong rebound in the most recent year.

Cost of Capital

The cost of capital remained relatively stable throughout the period, with a slight upward trend from 15.14% in 2019 to a peak of 15.58% in 2023, followed by a marginal decrease to 15.56% in 2024. This consistency suggests stable financing costs and risk perception by investors over time.

Invested Capital

Invested capital steadily increased each year, rising from 5,864,612 thousand USD in 2019 to 10,307,049 thousand USD in 2024. The growth accelerated particularly between 2023 and 2024, indicating significant additional investment or asset base expansion. This expansion may reflect strategic growth initiatives or acquisitions.

Economic Profit

Economic profit, calculated as the difference between NOPAT and the capital charge, was negative in all years except 2022. It improved somewhat from a negative 397,961 thousand USD in 2019 to negative 253,578 thousand USD in 2020 but worsened again in subsequent years, except for a positive 157,211 thousand USD in 2022. In 2023 and 2024, economic profit deteriorated substantially to negative 367,836 thousand USD and negative 541,551 thousand USD respectively. This pattern suggests that despite operational profitability, the returns on invested capital have generally been below the cost of capital, indicating value destruction except for the brief positive result in 2022.

In summary, while net operating profit has shown strong growth and partial recovery after a decline, the steady rise in invested capital and the persistently negative economic profit highlight ongoing challenges in generating returns above the cost of capital. The data points to a need for more efficient capital allocation or improved operational leverage to enhance economic profitability moving forward.

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 exhibited considerable fluctuations over the observed period. Initially, it showed a substantial negative value of -397,961 thousand US dollars, which improved by 144,383 thousand US dollars in the following year, reaching -253,578 thousand US dollars. However, this improvement was not sustained, as the value slightly declined in the subsequent year to -277,103 thousand US dollars. A significant turnaround occurred in the year ending October 31, 2022, where economic profit turned positive at 157,211 thousand US dollars. Despite this, the trend reversed sharply in the two following years, with economic profit falling to -367,836 thousand and then to -541,551 thousand US dollars, indicating increasing economic losses.

Invested Capital

Invested capital showed a consistent upward trend throughout the period. Starting from 5,864,612 thousand US dollars, it steadily increased year on year, reaching 10,307,049 thousand US dollars by October 31, 2024. The progression reflects a continual expansion of capital investment, with the most notable increase occurring between 2023 and 2024, where invested capital rose by approximately 2,222,291 thousand US dollars.

Economic Spread Ratio

The economic spread ratio mirrored the fluctuations seen in economic profit. The ratio began at -6.79% in 2019, improving notably to -3.81% in 2020, followed by a slight deterioration to -3.99% in 2021. In 2022, the ratio turned positive to 2.03%, reflecting the positive economic profit in that year. However, from 2023 onwards, the ratio declined again, exacerbating to -4.55% and further to -5.25% in 2024, indicating diminishing returns relative to the cost of capital despite increased invested capital.

Summary

Overall, the company experienced significant volatility in economic performance over the analysis period. Although invested capital steadily increased, suggesting growth or greater resource commitment, the economic profit and spread ratio indicate challenges in generating adequate returns on this investment. The brief positive spike in economic profit and spread ratio in 2022 stands out as an anomaly in an otherwise negative trend in economic profitability. The latest figures from 2023 and 2024 highlight a worsening economic profit and spread ratio, suggesting that the increased capital base is not translating efficiently into value creation during these years.

The analysis of the financial data over the six-year period reveals notable fluctuations in economic profit and its corresponding margin, alongside a consistent increase in adjusted revenue.

Adjusted Revenue

There is a clear upward trend in adjusted revenue, which grows steadily from approximately 3.39 billion US dollars in 2019 to about 6.15 billion US dollars in 2024. This represents a nearly doubling of revenue over the period, indicating strong top-line growth and an expanding business scale.

Economic Profit

The economic profit figures are more volatile. The company experienced negative economic profit in most years, with an improvement in 2022 where the profit turned positive to 157.2 million, followed by a significant decline again into negative territory in the subsequent years. Specifically, economic profit climbed from -398 million in 2019 to -254 million in 2020, slightly dipped to -277 million in 2021, rose to a positive 157 million in 2022, before falling sharply to -368 million in 2023 and -542 million in 2024. The volatility suggests instability in generating returns above the cost of capital despite rising revenues.

Economic Profit Margin

The economic profit margin mirrors the pattern observed in economic profit. Initially negative at -11.73% in 2019, it improves through 2020 and 2021 to about -6.35%, peaks positively at 2.86% in 2022, then declines back to negative margins of -6.42% in 2023 and further to -8.81% in 2024. This oscillation indicates that even with revenue growth, profitability relative to the invested capital experienced challenges, with only a brief return to positive margin.

In summary, while adjusted revenue shows robust and continuous growth over the period, economic profit and its margin vary significantly, highlighting potential issues with cost control, investment efficiency, or other operational factors affecting overall profitability. The brief instance of positive economic profit and margin in 2022 may point to temporary improvements that were not sustainable in the following years.