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(NASDAQ: SNPS) trades at a premium valuation that requires sustained mid-20% annual free cash flow growth to justify, according to analysis of the company's fiscal 2027 targets.
The stock closed at approximately 87 times trailing GAAP earnings as of October 2, 2026, a multiple significantly higher than the S&P 500 index and its closest software peer, Cadence Design Systems, Inc.
This valuation gap depends on Synopsys converting its entrenched customer relationships into cash growth while absorbing the integration of ANSYS, Inc.
The company's business model relies heavily on recurring revenue, which accounted for 83% of fiscal second-quarter 2026 revenue.
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