Synopsys (SNPS) Marked As A Barbarian At The Gate

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Synopsys ( SNPS) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Synopsys as such a stock due to the following factors:

  • SNPS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $32.1 million.
  • SNPS has traded 166,824 shares today.
  • SNPS traded in a range 283.7% of the normal price range with a price range of $1.70.
  • SNPS traded above its daily resistance level (quality: 531 days, meaning that the stock is crossing a resistance level set by the last 531 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on SNPS:

Synopsys, Inc. provides electronic design automation (EDA) software products used to design and test integrated circuits and electronic systems in the United States, Europe, Japan, and the rest of Asia Pacific. SNPS has a PE ratio of 3. Currently there are 5 analysts that rate Synopsys a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Synopsys has been 599,200 shares per day over the past 30 days. Synopsys has a market cap of $7.5 billion and is part of the technology sector and electronics industry. The stock has a beta of 0.74 and a short float of 1.2% with 1.76 days to cover. Shares are up 13.3% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Synopsys as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 1.5%. Since the same quarter one year prior, revenues rose by 13.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, SNPS's share price has jumped by 28.07%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SNPS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • SYNOPSYS INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, SYNOPSYS INC increased its bottom line by earning $1.64 versus $1.58 in the prior year. This year, the market expects an improvement in earnings ($2.77 versus $1.64).
  • SNPS's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.89 is somewhat weak and could be cause for future problems.

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