Synopsys Inc. (NASDAQ:SNPS)

The financial data reveals notable trends in profitability, capital investment, and value creation over the observed period.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited a general upward trend from 2019 through 2024, increasing from approximately $490 million to over $1 billion. The most significant jump occurred in 2022, reaching around $1.36 billion, followed by a sharp decline in 2023 before recovering somewhat in 2024. This volatility suggests fluctuations in operating efficiency or revenue generation during these years.

Cost of Capital

The cost of capital remained relatively stable across the period, hovering slightly above 15%, with minimal variation from 15.13% in 2019 to 15.55% in 2024. This indicates a steady cost environment for financing and investment decisions.

Invested Capital

Invested capital showed continuous growth, increasing from about $5.86 billion in 2019 to over $10.3 billion by 2024. This steady rise points to increased asset base or capital expenditures, which may support future growth but also raises the capital employed that must generate returns.

Economic Profit

Economic profit was negative throughout most of the period, reflecting operating profits insufficient to cover the cost of capital on invested assets. Although there was a positive spike in 2022 with economic profit reaching approximately $158 million, this was not sustained, as the values reverted to negative figures in subsequent years, declining to an approximate loss of $540 million in 2024. This pattern indicates challenges in generating shareholder value despite rising operating profits and capital investment.

Overall, while operational profitability grew substantially, the upward trend in invested capital and stable but relatively high cost of capital resulted in persistent negative economic profit for most years. The brief positive economic profit in 2022 highlights potential shifts that were not maintained, suggesting the need for strategic actions to improve capital efficiency and economic returns.

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 performance over the six-year period reveals notable fluctuations in economic profit and related metrics. Economic profit demonstrates a predominantly negative trend, with three distinct phases apparent during the timeframe. Initially, from 2019 to 2021, the economic profit shows a reduction in losses, improving from -397,334 thousand US dollars in 2019 to -252,854 thousand US dollars in 2020, before slightly worsening to -276,343 thousand US dollars in 2021. This indicates some recovery although still within a loss context.

In 2022, a significant deviation occurs as economic profit turns positive, registering 158,057 thousand US dollars. This marks a notable improvement, suggesting a period of enhanced profitability or efficient capital utilization. However, this positive outcome is short-lived, as the figures revert to negative territory in the subsequent years, showing -366,948 thousand US dollars in 2023 and further declining to -540,420 thousand US dollars in 2024, indicating a substantial deterioration in economic profit.

Invested capital follows a consistent upward trajectory throughout the period, increasing steadily from 5,864,612 thousand US dollars in 2019 to 10,307,049 thousand US dollars in 2024. This suggests continuous capital deployment or asset growth, potentially reflecting expansion, acquisitions, or increased investments in company operations.

The economic spread ratio correlates with observed economic profit trends, showing negative values for most years, indicative of returns below the cost of capital. From -6.78% in 2019, it improves to -3.8% in 2020 and slightly worsens to -3.98% in 2021. In 2022, the ratio turns positive at 2.04%, aligning with the positive economic profit reported, signaling a period where returns exceeded costs. However, this improvement is reversed in subsequent periods, with the ratio declining to -4.54% in 2023 and further to -5.24% in 2024, indicating diminishing return rates below capital costs.

In summary, the company experienced a mostly challenged economic profitability scenario with one year of positive performance in 2022, set against a backdrop of steadily increasing invested capital. The volatility and eventual escalation of negative economic profit in the latest year raise concerns about the efficiency and profitability of capital deployment during that phase.

Adjusted Revenue

The company's adjusted revenue demonstrated a consistent growth trajectory over the analyzed period. Starting at approximately 3.39 billion US dollars in 2019, revenue increased annually, reaching about 6.15 billion US dollars by 2024. This nearly doubling of revenue over five years indicates a robust expansion in the company's top line.

Economic Profit

The economic profit figures reveal significant volatility. Initially, the company experienced negative economic profits, starting at around -397 million US dollars in 2019. This negative trend improved somewhat in 2020 and 2021, though economic profit remained negative at approximately -253 million and -276 million US dollars, respectively. In 2022, there was a remarkable reversal to positive economic profit of about 158 million US dollars, implying a period of operational efficiency or the realization of economic gains. However, this improvement was short-lived, as economic profit sharply declined again in 2023 and 2024, reaching -367 million and further falling to -540 million US dollars. This pattern suggests challenges in maintaining sustainable profitability despite growing revenues.

Economic Profit Margin

The economic profit margin mirrored the fluctuations observed in economic profit. The margin started at -11.71% in 2019 and improved progressively through 2020 and 2021, narrowing to around -6.52% and -6.33%, respectively. In 2022, the margin turned positive to 2.88%, reflecting the corresponding positive economic profit that year. However, the margin reverted to negative territory in subsequent years, measuring -6.41% in 2023 and further declining to -8.79% in 2024. This indicates that despite revenue growth, the company has struggled to consistently convert sales into economic profit.

Overall Analysis

The data reflects a company with strong revenue growth but inconsistent profitability as measured by economic profit and its margin. The transient improvement in 2022 suggests the possibility of a favorable one-time event or operational improvement. However, the return to negative economic profit and margin in the following years highlights ongoing challenges related to cost management, capital efficiency, or competitive pressures. The widening negative economic profit toward the end of the period emphasizes a need for strategies to improve underlying profitability and sustain value creation.