Synopsys (SNPS) continues to attract attention after recent signals of increased institutional backing, as analysts point to the company’s strong position in electronic design automation and expanding reach into automotive and industrial markets. Ongoing collaborations, such as its new mobility partnership, are reinforcing a longer-term growth story.

After a strong run in recent years, Synopsys' share price is taking a breather. The 1-year total shareholder return is -7.9%, while the 5-year total return is over 100%. Despite some recent volatility, long-term momentum and optimism around sector expansion are still part of the story.

If Synopsys’ moves into AI-driven automotive tech have sparked your curiosity, now could be the right time to discover See the full list for free.

With analyst price targets well above current levels and new growth engines accelerating, Synopsys’ recent dip raises a familiar question: is the market underestimating the company’s prospects or already factoring in its future gains?

Most Popular Narrative: 18.4% Undervalued

With Synopsys closing at $454.30, the most influential narrative estimates a fair value of $556.40, implying significant upside from current levels in the eyes of followers. Get ready for a pivotal insight that highlights a major growth catalyst for Synopsys’s future.

The accelerating complexity and proliferation of AI, high-performance computing, and multi-die/chiplet-based architectures are increasing customer demand for Synopsys' advanced design, verification, and simulation solutions. This is solidifying its role as a mission-critical partner in next-generation chip and system development, supporting both revenue growth and opportunities for higher-margin recurring licensing.

Think today’s price is all about sector noise? The blueprint for this narrative leans on bold growth forecasts, remarkable expansion in critical end-markets, and sky-high profit expectations. Wonder which financial levers and analytic bets power this underappreciated target? The full narrative unpacks the details and reveals the calculations behind one of the market’s biggest value stories.

Result: Fair Value of $556.40 (UNDERVALUED)

However, persistent export restrictions and continued customer uncertainty in China remain key risks that could undermine Synopsys’s growth outlook if these issues are not resolved.

Another Perspective: The Numbers Tell a Different Story

While the fair value narrative paints Synopsys as undervalued, the current price-to-earnings ratio is 72.3x, noticeably higher than both its peer group (70x) and the US Software industry as a whole (34.3x). Compared to a fair ratio of 47.6x, this signals that the market is pricing in a lot of future growth, which raises the practical risk that expectations may already be elevated. Could this premium be justified, or does it set the stage for disappointment?

Build Your Own Synopsys Narrative

If you see the story unfolding differently or want to form your own view, it’s quick and easy to craft a custom narrative in just minutes. Do it your way

A great starting point for your Synopsys research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

Looking for More Investment Ideas?

Stay ahead of the curve. The right move now could help you seize powerful growth trends that others might miss, so don’t wait for the next opportunity to pass you by.

• Boost your strategy by checking out these 26 AI penny stocks. These tech trailblazers are harnessing artificial intelligence to power tomorrow’s most innovative solutions.
• Strengthen your portfolio with these 17 dividend stocks with yields > 3%, a smart way to lock in reliable income with companies committed to rewarding investors.
• Tap into major breakthroughs by exploring these 27 quantum computing stocks. Quantum computing pioneers are reshaping the landscape of high-speed processing.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.