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Why Synopsys Stock Rose 11% in August

By Demitri Kalogeropoulos - Updated Sep 9, 2020 at 9:33AM

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The software giant reported solid sales growth and improving profitability for its fiscal third quarter.

What happened

Synopsys (SNPS -0.59%) shareholders outpaced a booming market in August. The stock rose by 11% compared to the S&P 500's 7% increase, according to data provided by S&P Global Market Intelligence.

That boost added to an impressive rally for investors in the software giant's stock, which is now up by about 44% year to date.

A man works behind a computer screen.

Image source: Getty Images.

So what

Investors were pleased with the fiscal third-quarter report that Synopsys released in late August, which showed double-digit percentage sales growth across its product categories. Overall, its revenue rose 13% and profitability surged to 34% of sales compared to 25% a year earlier. "Our intense, multi-year innovation push is driving increased momentum in product successes and production adoptions," CEO Aart de Geus said in a press release.

Now what

De Geus and his team raised their operating and financial outlooks for the company's fiscal year, which ends in late October. Synopsys is now anticipating annual sales as high as $3.7 billion and cash flow of $900 million.

The stock might continue to outperform the market as long as the tech specialist can continue beating Wall Street's expectations on key metrics like sales, operating margin, and free cash flow.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Synopsys. The Motley Fool has a disclosure policy.

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