Well, Synopsys (NASDAQ:SNPS) investors, I warned you that yesterday would be a head-scratcher. And indeed it was.

As of this writing, Synopsys is up nearly 2% in after-hours trading; whether or not that's justified lies in the eyes of the beholder. In one sense, Synopsys did no better than expected yesterday. It reported pro forma (Latin for "Let's not quibble over the details, OK?") profits of $0.10 per share for its fiscal Q4 2005. Although that's a 10-fold increase over its performance one year ago, it merely matched analyst estimates for earnings. Nothing to get excited about there.

Viewed from a more "generally accepted" point of view, however, Synopsys did considerably worse than expected. The company itself predicted back in August that its net loss would be no worse than $0.02 per share under generally accepted accounting principles. As it turned out, Synopsys admitted yesterday to an $0.08-per-share loss -- considerably better than the $0.19 per share lost last year, but worse than its own projections of three months ago.

Now take a step to your left, and peer over your right shoulder for a third perspective -- that of free cash flow (FCF). This is the one I suggested focusing on when previewing Synopsys' results two days ago, and from this perspective, Synopsys blew the top off the curve. At last report, the company was hoping to generate something on the order of $163 million worth of FCF for its entire fiscal year (the full-year results were posted alongside the fourth quarter's numbers yesterday). That was the expectation, but the actual result was much better: $269.2 million in cash from operations, minus $43.6 million in capital expenditures and $3 million in capitalized software development costs, got the company to a whopping $222.6 million in FCF (excluding acquisitions).

Although that's not much of an improvement over fiscal 2004's $216.3 million in FCF, it doesn't really have to be at these prices. With a market cap of just $2.8 billion, yesterday's performance gives the company a trailing price-to-FCF ratio of just 12.7. Since analysts expect Synopsys to grow its earnings at an annual rate of 15% over the long term, that ratio makes the company's stock a serious candidate for buying.

As good as Synopsys looks, though, you owe it to yourself to also check out its competitors. Mentor Graphics (NASDAQ:MENT) looks considerably overvalued at a P/FCF of 35 and growth rate of 15%. Cadence Design (NASDAQ:CDNS) is a bit more reasonable, at a P/FCF of 15 and a 14% growth rate. But perhaps the bargain of the bunch is little Magma Design (NASDAQ:LAVA). Its P/FCF is just a hair pricier than Synopsys' at 14, but its projected growth rate of 25% more than makes up the difference.

Fool contributor Rich Smith does not own shares of any company named above.