STOCKREPORTS		 Synopsys, Inc. Nasdaq Symbol SNPS
21-JUN-97 Industry:
Computer (Software & Services)		 Summary: This company develops, markets and supports high-level design automation software for designers of integrated circuits and electronic systems.

Recent Price 35.50
52 Wk Range 47.50 - 25.00		 Yield Nil
12-Mo. P/E 30.9

Quantitative Evaluation:
Outlook (1 Lowest - 5 Highest)
5-
Fair Value
59.30
Risk
MEDIUM
Earn/Div Rank
B-
Technical Evaluation:
BEARISH since 02/97
Rel. Strength Rank (1 Lowest - 99 Highest)
55
Insider Activity
Favorable

Overview 05-MAY-97

Revenue growth should approach 30% in FY 97 (Sep.). The gains will be driven by the increasingly complex design of integrated circuits, which will benefit demand for the company's automation models and software products. In addition, the company's expanding customer base will lead to higher service revenues. Gross margins will remain extraordinarily high (approximately 88%), but will decline slightly from FY 96, due to the recent acquisition of EPIC Design Technology, Inc. However, the higher volume should lift overall operating margins. Per share earnings growth will be restricted by an increase in average shares outstanding related to the EPIC merger. EPS from continuing operations are expected to increase to $1.48 from FY 96's $1.19. These results are prior to acquisition-related write-offs of in-process R&D. Such charges lowered EPS by $0.08 and $0.62 in FY 97 and FY 96, respectively.

Valuation 05-MAY-97

Like many of its industry peers, Synopsys has seen its stock drop sharply this year, due to fears of slowing growth. While a recent rally has lifted the shares well above its lows, we think additional near-term gains will be more difficult, and we are not recommending the shares at this time. Although the company has good prospects for solid long-term earnings growth, it is likely to slow from the rapid pace of recent years, and we think the stock is fully valued at 24X our FY 97 EPS estimate. However, SNPS remains a worthwhile holding for aggressive investors. With chip complexity continuing to grow at a factor of 10 every six years, demand for SNPS's design tools will remain strong for several years to come, and the company should continue to realize solid growth.

Key Stock Statistics

S&P EPS Est. 1997 1.40
P/E on S&P Est. 1997 25.4
Dividend Rate/Share Nil
Shs. outstg. (M) 51.4
Avg. daily vol. (M) 0.702
Tang. Bk. Value/Share 6.32
Beta 1.19
Shareholders 300
Market cap. (B) $ 1.8
Inst. holdings 75%
Value of $10,000 invested 5 years ago:NA

Fiscal Year Ending Sep. 30

Revenue (Million $)
1997 1996 1995 1994 1993 1992
Q1 102.5 79.00 59.90 44.20 21.20 13.00
Q2 124.2 85.00 62.50 47.20 25.00 14.40
Q3 NA 91.00 68.10 50.30 29.50 16.10
Q4 NA 98.50 73.50 54.30 32.30 19.50
Year NA 353.5 265.5 196.0 108.0 63.00

Earning Per Share ($)
1997 1996 1995 1994 1993 1992
Q1 0.38 0.28 0.20 0.14 0.08 0.05
Q2 0.19 -0.36 0.21 0.00 0.09 0.06
Q3 E0.40 0.30 0.09 0.09 0.11 0.07
Q4 E0.43 0.32 0.25 0.18 0.13 0.07
Year E1.40 0.57 0.75 0.42 0.42 0.24

Dividend Data: No cash dividends have been paid on the common stock. The company intends to retain all available funds for use in the operation of its business and does not expect to pay cash dividends in the foreseeable future.

Business Summary 05-MAY-97

Since its founding in 1986, Synopsys (SNPS) has helped shape modern electronic design and realized substantial growth in the process. The ever-increasing complexity of integrated circuits has been a boon for SNPS. Its high-level design automation (HLDA) models and software help designers of integrated circuits and electronic systems build more complex and powerful integrated circuits and bring new products to market faster than ever before. Synopsys is the second largest provider of electronic design automation (EDA) products in the world. Thanks to the large growth in its customer base, SNPS also realizes significant revenues from services including education, support and consulting.

Revenues in recent fiscal years (ended September) were derived as follows:

FY 96 FY 95 FY 94
Product 66% 68% 69%
Service 34% 32% 31%

The company's HLDA products include logic and behavioral synthesis, simulation, test design reuse and model offerings. Synopsys also offers interface products that permit the sharing of data with other EDA systems, library tools that assist semiconductor vendors in developing technology libraries, and graphical user interface/analysis tools.

In the third quarter of FY 96, the company introduced FPGA Express, a synthesis tool for high density field programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs). FPGAs and CPLDs are the fastest growing segment of the semiconductor industry.

SNPS believes that its HLDA methodology is applicable to a wide range of digital microelectronic design. HLDA tools are marketed to customers that design complex integrated circuits and electronic systems, including many of the world's leading semiconductor, computer, communications and aerospace companies. Markets for SNPS's products are characterized by rapid technological advances, competitive pressures to develop and introduce new products, the need for testability and the necessity of extensive system simulation and debugging prior to design implementation.

The EDA industry is highly competitive, with Cadence Design Systems and Mentor Graphics seen as the company's two principal competitors. The company believes that competition will increase as a result of industry consolidation, causing price reductions and loss of market share. SNPS expects that the principal competitive factors in the EDA market are product performance, technical support, price and reputation. The company believes that it currently competes favorably with respect to these factors.

Capitalization

Long Term Debt: $12,260,000 (3/97).

Per Share Data ($)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Tangible Bk. Val. 5.76 4.65 3.35 2.68 1.96 1.68 NA NA NA NA
Cash Flow 1.02 1.15 0.71 0.62 0.38 0.28 0.21 0.03 NA NA
Earnings 0.57 0.75 0.42 0.42 0.24 0.13 0.16 0.01 -0.10 -0.19
Dividends Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Payout Ratio Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Prices - High 50 1/2 38 1/2 24 3/8 26 3/8 17 3/4 NA NA NA NA NA
- Low 27 1/2 21 3/8 16 1/2 12 7/8 9 NA NA NA NA NA
P/E Ratio - High 89 51 58 64 74 NA NA NA NA NA
- Low 48 28 39 31 38 NA NA NA NA NA

Income Statement Analysis (Million $)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Revs. 354 266 196 108 63.0 40.5 22.1 7.3 1.0 0.1
Oper. Inc. 47.6 58.3 47.3 26.2 14.5 8.8 6.3 0.4 NA NA
Depr. 18.7 15.5 10.9 6.2 4.0 3.7 1.2 0.4 NA NA
Int. Exp. Nil NM Nil 0.1 0.6 0.3 0.2 0.1 NA NA
Pretax Inc. 35.9 47.7 25.0 20.9 11.2 5.5 5.5 0.4 -1.6 -0.5
Eff. Tax Rate 34% 37% 37% 37% 36% 36% 34% 47% Nil Nil
Net Inc. 23.7 30.3 15.8 13.2 7.1 3.5 3.7 0.2 -1.6 -0.5

Balance Sheet & Other Fin. Data (Million $)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Cash 237 210 139 83.8 42.7 12.2 11.2 NA NA NA
Curr. Assets 318 263 180 101 63.5 22.2 17.7 NA NA NA
Total Assets 409 212 208 122 81.6 35.4 22.2 11.5 4.4 4.3
Curr. Liab. 160 88.2 87.3 39.6 22.9 12.4 8.7 NA NA NA
LT Debt 16.0 NM Nil Nil 0.6 2.1 1.4 0.8 0.3 0.0
Common Eqty. 233 124 121 82.2 58.1 20.9 11.9 7.8 3.2 3.9
Total Cap. 249 124 121 82.2 58.7 23.0 13.3 8.6 3.5 4.0
Cap. Exp. 39.2 11.0 13.0 9.6 4.3 3.2 1.1 0.5 NA NA
Cash Flow 42.4 45.8 26.7 19.4 11.1 7.2 4.8 0.6 NA NA

Curr. Ratio 2.0 3.0 2.1 2.5 2.8 1.8 2.0 NA NA NA
% LT Debt of Cap. 6.4 NM Nil Nil 1.0 9.3 10.8 8.8 8.7 0.1
% Net Inc.of Revs. 6.7 11.4 8.0 12.2 11.3 8.7 16.5 2.9 NM NM
% Ret. on Assets 6.7 11.9 8.8 12.6 7.3 12.3 21.8 2.6 NM NM
% Ret. on Equity 11.4 19.8 14.2 18.3 18.3 21.5 37.1 3.8 NM NM

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--700 E. Middlefield Rd., Mountain View, CA 94043. Tel--(415) 962-5000. Fax--(415) 965-8637. Website--http://www.synopsys.com Chrmn--H. C. Jones Jr. Pres & CEO--A. J. de Geus. Secy--P. M. Lippe. Dirs--D. Coleman, A. J. de Geus, H. C. Jones Jr., W. W. Lattin, A. R. Newton, S. C. Walske. Transfer Agent & Registrar--Boston EquiServe, Canton MA. Incorporated--in North Carolina in 1986; reincorporated in Delaware in 1987. Empl-- 1,716. S&P Analyst: Stephen T. Madonna, CFA


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