Insights on Adobe – What Our Analysts Have Discovered

Adobe logged a -0.5% change during today's afternoon session, and is now trading at a price of $609.73 per share.

Adobe returned gains of 84.0% last year, with its stock price reaching a high of $615.57 and a low of $318.6. Over the same period, the stock outperformed the S&P 500 index by 70.0%. More recently, the company's 50-day average price was $545.83. Adobe Inc., together with its subsidiaries, operates as a diversified software company worldwide. Based in San Jose, CA, the large-cap Technology company has 29,239 full time employees. Adobe has not offered a dividend during the last year.

Growing Revenues With Increasing Reinvestment in the Business:

2018 2019 2020 2021 2022 2023
Revenue (MM) $9,030 $11,171 $12,868 $15,785 $17,606 $18,886
Operating Margins 31.0% 28.0% 33.0% 37.0% 35.0% 34.0%
Net Margins 28.0% 26.0% 41.0% 31.0% 27.0% 27.0%
Net Income (MM) $2,591 $2,951 $5,260 $4,822 $4,756 $5,121
Net Interest Expense (MM) $89 $157 $116 $113 $112 $113
Depreciation & Amort. (MM) $346 $757 $757 $788 $856 $865
Earnings Per Share $5.2 $6.0 $10.83 $10.02 $10.1 $11.11
Diluted Shares (MM) 498 492 486 481 471 430
Free Cash Flow (MM) $3,762 $4,027 $5,308 $6,882 $7,396 $7,626
Capital Expenditures (MM) $267 $395 $419 $348 $442 $404
Net Current Assets (MM) -$4,550 -$3,737 -$2,874 -$3,775 -$4,118 -$2,904
Long Term Debt (MM) $4,125 $989 $4,117 $4,123 $3,629 $3,633
Net Debt / EBITDA 0.79 0.37 -0.07 0.04 -0.02 -0.4

Adobe benefits from growing revenues and increasing reinvestment in the business, a pattern of improving cash flows, and low leverage. The company's financial statements show decent operating margins with a stable trend and a strong EPS growth trend.

Adobe's P/B and P/E Ratios Are Higher Than Average:

Adobe has a trailing twelve month P/E ratio of 49.2, compared to an average of 27.16 for the Technology sector. Based on its EPS guidance of $17.98, the company has a forward P/E ratio of 30.4. Adobe's PEG ratio is 5.27 on the basis of the 9.3% weighted average of the company and the broader market's EPS compound average growth rates. This suggests that the company's shares are overvalued. Furthermore, Adobe is likely overvalued compared to the book value of its equity, since its P/B ratio of 17.62 is higher than the sector average of 6.23. The company's shares are currently trading 535.9% above their Graham number. Overall, Adobe's lofty valuation in terms of earnings and assets is to some extent attenuated by its strong cash flow trend and reasonable levels of debt.

Adobe Has an Average Rating of Buy:

The 28 analysts following Adobe have set target prices ranging from $428.0 to $700.0 per share, for an average of $616.54 with a buy rating. As of April 2023, the company is trading -11.5% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Adobe has a very low short interest because 0.9% of the company's shares are sold short. Institutions own 86.4% of the company's shares, and the insider ownership rate stands at 0.29%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 9% stake in the company is worth $24,183,640,950.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.