There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

November 28, 2011 -  Synopsys, Inc. (SNPS-NASDAQ) provides technology solutions used to develop electronics and electronic systems worldwide. It offers electronic design automation (EDA) software that engineers use to design and create prototypes for and test integrated circuits, as well as supplies software and hardware used to develop the systems that incorporate integrated circuits and the software that runs on those integrated circuits.

It also offers silicon-proven intellectual property (IP) solutions for systems-on-chips (SoCs) designs, including solutions for USB, PCI Express, DDR, Ethernet, SATA, and HDMI interfaces; analog IP for high definition video, analog-to-digital data conversion, and audio; and embedded memories, such as SRAMs and non-volatile memory, logic libraries, embedded test and repair IP, and configurable processor cores.

In addition, the company provides System-Level Solutions comprising tools for the system-level design of SoCs, as well as prototyping tools for hardware verification, software development, and hardware-software integration. Further, it offers manufacturing solutions that address mask-making and yield enhancement of very small-geometry integrated circuits, as well as high-level modeling of physical effects within the integrated circuit. Additionally, the company has consulting and design, software maintenance, and training workshop services.

Synopsys, Inc. has a strategic collaboration with Rohde & Schwarz GmbH & Co. KG. The company was founded in 1986 and is headquartered in Mountain View, California.

First, it has no debt. Zero. Doesn't owe anybody anything. Second, it works in niches that are very strong, even in this economy, areas like design activity for mobile devices and cloud infrastructure. It's also active in what the company calls "smart everything" devices, ones used in cars, buildings, toaster ovens, anything with a "brain" in it that makes it seem smart.

Not only are there more "brains" in almost every device, there's also a strong movement toward mobile. Both of these trends favor SNPS's services and products. It offers companies complete solutions, giving them the ability to stay competitive and cut expenses.

Synopsys has a global reach with 52% of its 2010 revenues coming from foreign sales. In the last 3 quarters, revenues in 2 regions, Europe and Asia, were up about 14% and 22% respectively, from a year ago. They now represent more than half of all sales. Expect more from Asia as the company adds capacity in this fast growing region as it leads the way in many new consumer devices.

Earnings were $1.60 last year (fiscal year ends in October). For this year, 7 analysts expect $1.80, then $1.96 in 2012. Fourth quarter earnings will be out on November 30 with expectations of 45 cents from 7 analysts compared to 39 cents last year in the fourth. First quarter consensus is for 46 cents vs 44 cents this year.

Management has been busy buying other companies. In the last several months, it acquired Extreme DA and nSys Design Systems. The first adds technology and engineering expertise which should help in the development in timing analysis solutions. The second purchase adds VIP technology that is used to help with verification challenges in smart devices. Some analysts have raised a concern about the good will created from these acquisitions, wondering if management overpaid for them. Now the company carries about $1.5 billion in goodwill and other intangibles.

Essential Numbers:
- Trailing P/E: 20
- Forward P/E: 13.9
- Price to sales ratio: 2.53
- Price to book: 1.81
- Operating margin: 12.48%
- Profit margin: 13.6%
- Return on equity: 9.92%
- Return on assets: 3.66%
- Revenues last 12 months: $1.52 billion
- Total cash: $1.04 billion
- Total cash per share: $7.21
- Total debt: 0
- Current ratio: 1.39
- Book value per share: $14.77
- 52 week change; 3.41%
- Total shares outstanding: 144.05 million
- Float: 142.94 million
- Owned by insiders: .7%
- Owned by institutions: 89.6%
- There is no dividend.

The chart on SNPS shows a rather range bound stock which is very positive in a stock market that has been so volatile. The price has traded between $20 and $29 for about 2 years. Is it ready to break out? Maybe.

With such a strong cash flow and a high cash balance, the company could buy back stock, buy more companies, increase Research & Development or even start a dividend. Cash is always good that way.

- Company Web site: www.synopsys.com

Ted Allrich