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โ Dimitry Nakhla | Babylon Capitalยฎ
A quality valuation analysis on $SNPS ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 30.75x
โข10-Year Mean: 37.51x
โขNTM FCF Yield: 2.41%
โข10-Year Mean: 2.67%
As you can see, $SNPS appears to be trading somewhere below fair value & near fair value
Going forward, investors can receive ~22% MORE in earnings per share & ~10% LESS in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $SNPS is a good business
BALANCE SHEETโ
โขCash & Short-Term Inv: $4.05B
โขLong-Term Debt: $15.60M
$SNPS has a strong balance sheet & 40x FFO Interest Coverage
RETURN ON CAPITALโ
โข2020: 11.8%
โข2021: 12.9%
โข2022: 18.7%
โข2023: 19.3%
โข2024: 14.0%
RETURN ON EQUITYโ
โข2020: 14.7%
โข2021: 14.8%
โข2022: 17.8%
โข2023: 20.7%
โข2024: 18.6%
$SNPS has great return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $2.06B
โข2024: $6.13B
โขCAGR: 11.52%
FREE CASH FLOWโ
โข2014: $1.34B
โข2024: $4.69B
โขCAGR: 11.11%
NORMALIZED EPSโ
โข2014: $2.53
โข2024: $13.20
โขCAGR: 17.96%
SHARE BUYBACKS๐
โข2014 Shares Outstanding: 157.71M
โขLTM Shares Outstanding: 155.94M
MARGINSโ
โขLTM Gross Margins: 81.4%
โขLTM Operating Margins: 22.1%
โขLTM Net Income Margins: 23.5%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~22% MORE in EPS & ~10% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $SNPS has to grow earnings at a 15.38% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly less than the (15.38%) required growth rate:
2025E: $14.89 (12.8% YoY) *FY Oct
2026E: $17.15 (15.2% YoY)
2027E: $19.86 (15.8% YoY)
$SNPS has a great track record of meeting analyst estimates ~2 years out, but letโs assume $SNPS ends 2027 with $19.86 in EPS & see its CAGR potential assuming different multiples:
32x P/E: $635.52๐ต โฆ ~13.0% CAGR
31x P/E: $615.66๐ต โฆ ~11.7% CAGR
30x P/E: $595.80๐ต โฆ ~10.3% CAGR
29x P/E: $575.94๐ต โฆ ~8.9% CAGR
28x P/E: $566.08๐ต โฆ ~7.5% CAGR
Given its quality, moat, predictability, & growth rate, I am comfortable relying on a ~30x multiple, making $SNPS a good purchase today at $457๐ต
$SNPS will thrive as AI and tech advancements drive chip demand, boosting the need for its cutting-edge semiconductor design software that helps create faster, smarter chips, among other things
$SNPS offers a stellar way to tap into the semiconductor boom, delivering steady, predictable growth and reliable recurring revenue for investors seeking stability in the space
I consider $SNPS a strong purchase with a substantial margin of safety closer to $400๐ต, or ~27x NTM earnings (~12.5% below todays price)
Given todayโs estimates, at $400๐ต I can reasonably expect ~11.5% CAGR while assuming an attractive & conservative 27x multiple
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐[...]
A quality valuation analysis on $SNPS ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 30.75x
โข10-Year Mean: 37.51x
โขNTM FCF Yield: 2.41%
โข10-Year Mean: 2.67%
As you can see, $SNPS appears to be trading somewhere below fair value & near fair value
Going forward, investors can receive ~22% MORE in earnings per share & ~10% LESS in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $SNPS is a good business
BALANCE SHEETโ
โขCash & Short-Term Inv: $4.05B
โขLong-Term Debt: $15.60M
$SNPS has a strong balance sheet & 40x FFO Interest Coverage
RETURN ON CAPITALโ
โข2020: 11.8%
โข2021: 12.9%
โข2022: 18.7%
โข2023: 19.3%
โข2024: 14.0%
RETURN ON EQUITYโ
โข2020: 14.7%
โข2021: 14.8%
โข2022: 17.8%
โข2023: 20.7%
โข2024: 18.6%
$SNPS has great return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $2.06B
โข2024: $6.13B
โขCAGR: 11.52%
FREE CASH FLOWโ
โข2014: $1.34B
โข2024: $4.69B
โขCAGR: 11.11%
NORMALIZED EPSโ
โข2014: $2.53
โข2024: $13.20
โขCAGR: 17.96%
SHARE BUYBACKS๐
โข2014 Shares Outstanding: 157.71M
โขLTM Shares Outstanding: 155.94M
MARGINSโ
โขLTM Gross Margins: 81.4%
โขLTM Operating Margins: 22.1%
โขLTM Net Income Margins: 23.5%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~22% MORE in EPS & ~10% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $SNPS has to grow earnings at a 15.38% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly less than the (15.38%) required growth rate:
2025E: $14.89 (12.8% YoY) *FY Oct
2026E: $17.15 (15.2% YoY)
2027E: $19.86 (15.8% YoY)
$SNPS has a great track record of meeting analyst estimates ~2 years out, but letโs assume $SNPS ends 2027 with $19.86 in EPS & see its CAGR potential assuming different multiples:
32x P/E: $635.52๐ต โฆ ~13.0% CAGR
31x P/E: $615.66๐ต โฆ ~11.7% CAGR
30x P/E: $595.80๐ต โฆ ~10.3% CAGR
29x P/E: $575.94๐ต โฆ ~8.9% CAGR
28x P/E: $566.08๐ต โฆ ~7.5% CAGR
Given its quality, moat, predictability, & growth rate, I am comfortable relying on a ~30x multiple, making $SNPS a good purchase today at $457๐ต
$SNPS will thrive as AI and tech advancements drive chip demand, boosting the need for its cutting-edge semiconductor design software that helps create faster, smarter chips, among other things
$SNPS offers a stellar way to tap into the semiconductor boom, delivering steady, predictable growth and reliable recurring revenue for investors seeking stability in the space
I consider $SNPS a strong purchase with a substantial margin of safety closer to $400๐ต, or ~27x NTM earnings (~12.5% below todays price)
Given todayโs estimates, at $400๐ต I can reasonably expect ~11.5% CAGR while assuming an attractive & conservative 27x multiple
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐[...]
Offshore
โ Dimitry Nakhla | Babylon Capitalยฎ A quality valuation analysis on $SNPS ๐ง๐ฝโโ๏ธ โขNTM P/E Ratio: 30.75x โข10-Year Mean: 37.51x โขNTM FCF Yield: 2.41% โข10-Year Mean: 2.67% As you can see, $SNPS appears to be trading somewhere below fair value & near fair valueโฆ
๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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Offshore
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โ Hidden Value Gems
Good news on #Exor
Selling 4% in $RACE for โฌ1B buyback and a new acquisition.
Makes a lot of sense! https://t.co/WYW9FTOKmj
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Good news on #Exor
Selling 4% in $RACE for โฌ1B buyback and a new acquisition.
Makes a lot of sense! https://t.co/WYW9FTOKmj
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Offshore
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โ Stock Analysis Compilation
Baron Opportunity Fund on Inari Medical, Inc. $NARI US
Thesis: Inari Medical, Inc. is a promising investment due to its innovative catheter-based devices for treating venous thromboembolism and its potential for significant market growth, which attracted Stryker's acquisition offer.
(Extract from their Q4 letter)
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Baron Opportunity Fund on Inari Medical, Inc. $NARI US
Thesis: Inari Medical, Inc. is a promising investment due to its innovative catheter-based devices for treating venous thromboembolism and its potential for significant market growth, which attracted Stryker's acquisition offer.
(Extract from their Q4 letter)
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Offshore
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โ Mads Capital
$NVDA ER https://t.co/8KYSGirdbQ
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$NVDA ER https://t.co/8KYSGirdbQ
Take the biggest fcking risk of your entire life right now. tweet
Offshore
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โ Mads Capital
The Juice could've made even more today if he had extra buying power for his hedges and if TrendSpider worked
Scary that he can be up 3% on a day like this with all the short sellers targeting him https://t.co/kPozExtEZD
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The Juice could've made even more today if he had extra buying power for his hedges and if TrendSpider worked
Scary that he can be up 3% on a day like this with all the short sellers targeting him https://t.co/kPozExtEZD
THE JUICE ALMOST HEDGED $APP PERFECTLY:
"Of course I can get mad at myself for not selling all my $APP at $520 but it's pretty hard to time the tops perfectly"
"I sold 75-80% of my shares from $200 to $500, now a -40% pullback off the highs so I might start adding soon" https://t.co/eNchzI17Uw tweet
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โ App Economy Insights
$CRM Salesforce Q4 FY25 (January quarter):
โข Current RPO +11% Y/Y to $63B.
โข Revenue +8% Y/Y to $10B ($50M miss).
โข Operating margin 18% (+1pp Y/Y).
โข Non-GAAP EPS $2.78 ($0.17 beat).
FY26 guidance:
โข Revenue +7-8% to ~$40.7B ($0.7B miss).
โข Operating margin 22%. https://t.co/mYRpPS1ltj
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$CRM Salesforce Q4 FY25 (January quarter):
โข Current RPO +11% Y/Y to $63B.
โข Revenue +8% Y/Y to $10B ($50M miss).
โข Operating margin 18% (+1pp Y/Y).
โข Non-GAAP EPS $2.78 ($0.17 beat).
FY26 guidance:
โข Revenue +7-8% to ~$40.7B ($0.7B miss).
โข Operating margin 22%. https://t.co/mYRpPS1ltj
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Offshore
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โ Hidden Value Gems
Berkshire selling Apple shares, Exor cutting its Ferrari investment - price matters after all even for exceptional companies.
Munger would probably have been selling Costco this year โฆ
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Berkshire selling Apple shares, Exor cutting its Ferrari investment - price matters after all even for exceptional companies.
Munger would probably have been selling Costco this year โฆ
Good news on #Exor
Selling 4% in $RACE for โฌ1B buyback and a new acquisition.
Makes a lot of sense! https://t.co/WYW9FTOKmj tweet