SYNAPTICS Inc (SYNA) stock intrinsic value fair value estimate & owner earnings analysis

Synaptics designs chips it does not manufacture: touch and display controllers, fingerprint and biometric sensors, Wi-Fi and Bluetooth wireless chips, and low-power edge-AI processors used in PCs, cars, smart-home devices, industrial equipment and phones. In fiscal 2026 (year ended June 27, 2026) revenue was $1,197 million: Enterprise and Automotive $641 million (PCs, docking, displays, in-car touch), Core IoT $390 million (wireless and processors, up 43% helped by the wireless business acquired from Broadcom in early 2025), and Mobile $166 million, a line that keeps shrinking. Almost all sales are booked in Asia, where its customers' factories sit: China $537 million, Taiwan $363 million, Japan $128 million, South Korea $75 million. On June 25, 2026 Synaptics agreed to be acquired by onsemi in an all-stock merger: each Synaptics share becomes 1.350 onsemi shares, with closing expected in mid-2027 after a shareholder vote and regulatory approvals. Synaptics would owe a $235 million fee if it walked away for a better offer; onsemi would owe Synaptics $320 million if regulators block the deal. While the deal is pending, a Synaptics share is really a claim on onsemi stock. Our values below are for Synaptics as a standalone business, which is what shareholders keep if the deal fails. How we measure earnings. We start from operating cash flow, remove swings in working capital, subtract the cost of stock issued to employees (treated as a real expense), and subtract the capital spending needed to keep the business running. On that basis, owner earnings per share over the past eleven years were: 2016 $3.73, 2017 $2.60, 2018 -$0.30, 2019 $1.84, 2020 $3.00, 2021 $5.35, 2022 $8.81, 2023 $4.94, 2024 -$1.18, 2025 $0.89, 2026 $1.10. This is a full semiconductor cycle, including the 2018-2019 smartphone slump, the 2021-2022 pandemic boom and the 2023-2024 inventory bust, when revenue fell 45% from $1,740 million to $959 million in two years. Adding back the interest Synaptics pays its lenders, the business itself produced a median of about $100 million a year across that cycle, but only $74 million in 2025 and $63 million in 2026. Two things explain the weak recent level: stock pay to employees has climbed from about $60 million a year to $149 million (12.5% of sales), and revenue has not regained its old $1.3-1.7 billion range. Part of the 2026 stock-pay figure is unusual: grants to the employees who came over from Broadcom, and the absence of a prior-year reversal from departing executives. A normal level is probably closer to $130 million, which is why we expect some recovery from the 2026 level but not a return to the boom years. Wasting assets. Synaptics has grown largely by buying businesses (Conexant and Marvell's multimedia unit in 2017, DisplayLink in 2020, DSP Group in 2021, Broadcom's IoT wireless assets in 2025), and it charges about $119 million a year of amortization on what it bought. That charge is non-cash and is added back in owner earnings, but the purchased technology does age, so every case fades earnings after year ten rather than assuming they last forever. The 2024 and 2026 tax lines also include large non-cash swings, including a roughly $400 million write-off of US deferred tax assets in 2026; these did not affect cash and are excluded. What it owes. Synaptics has $400 million of 4% senior notes due June 2029 and $450 million of 0.75% convertible notes due December 2031 (convertible at about $99.69 a share, with the face amount settled in cash). Against that it held $443 million of cash at June 2026, of which we treat about $100 million as needed to run the business. Because the 2029 notes cost less than a long-term rate for three more years, we count the debt at about $486 million net in the base and bull cases. In the bear case, we assume the 2029 notes have to be refinanced at about 8% in the middle of a downturn, which raises the effective debt to about $536 million. Base case ($12.98 per share). Business cash flow before interest falls to about $54 million in fiscal 2027, a little below the $63 million of 2026 because merger costs and elevated stock pay continue. That is no better than the 14% decline actually recorded in 2026 (from $74 million to $63 million). It then recovers over three years to about $90 million, close to the median the business earned across the last full cycle. The recovery comes from the Broadcom wireless products already in the revenue base and stock pay settling back toward its historical share of sales. We do not assume new design wins or share gains. After that, earnings drift down about 2% a year through year ten and 3% a year afterwards, because Mobile keeps shrinking and acquired technology ages. The business is worth about $1,005 million; less $486 million of net debt, that leaves about $519 million, or $12.98 per share on roughly 40 million diluted shares. Bear case (-$1.86 per share). A downturn like the 2023-2024 one, when business cash flow fell from $383 million to $17 million in two years, arrives early. Cash flow runs $50 million, then $17 million for two years, recovering only to about $55 million, then fades 4% a year and 7% a year after year ten. That fade reflects China, Synaptics' largest market at 45% of sales, replacing foreign chips with domestic ones under export-control pressure. In this case the business is worth about $461 million against about $536 million of effective debt: the company would owe roughly $75 million more than it is worth. The $343 million of excess cash covers interest through the trough, so the company survives, but nothing is left for shareholders. Bull case ($35.32 per share). Edge-AI processors and the Broadcom-derived wireless line keep growing as they did in 2026, and stock pay normalizes. Business cash flow rises to about $160 million by year four, still well below the $251 million of 2023 and $383 million of 2022, then fades slowly. The business is worth about $1,899 million; less $486 million of debt, that leaves $35.32 per share. What could make this wrong. Synaptics' earnings swing more than its revenue: a 20% change in sales has repeatedly meant a near-total swing in owner earnings. Three things matter most. The first is whether stock pay falls back from 12.5% of sales; if it stays at the 2026 level, the base case loses roughly $7 a share. The second is whether Chinese customers keep buying. The third is whether the acquired wireless business holds its gains. The previous figures we published were built on a different basis and are not comparable with these. Margin-of-safety price. We are not confident in the earnings level. The business has produced anything from a loss to $383 million a year within a five-year span, and the last three years have been the weakest. The worst plausible outcome is a deep downturn combined with China shifting to domestic suppliers. The balance sheet would survive that, thanks to cash and maturities in 2029 and 2031, but shareholders would be left with little, as the bear case shows. If stock pay stays at 2026 levels and business cash flow stalls at about $65 million a year, the shares are worth roughly $6. Synaptics pays no dividend, so any return in the cases has to come from the value of the business being recognized, and the price assumes a holding period of about five years. A price of $4.50 values the equity at about $180 million for a business that, even at its 2026 level of cash generation, covers its interest about three times and carries $343 million of spare cash. From $4.50, reaching the base value within five years implies about 24% a year. The stalled outcome still implies a modest positive return rather than a loss. Because the bear case is worth nothing, the base outcome has to carry the whole return with room to spare, and $4.50 is where it does. The margin-of-safety price is $4.50. While the onsemi merger is pending, the shares are priced off onsemi's stock rather than Synaptics' own business, so this margin-of-safety price applies only if the merger agreement is terminated.