Is Adobe Stock Undervalued or Overvalued Today?
Adobe (Nasdaq: ADBE) is a large cap company that operates within the software industry. Its market cap is $69 billion today, and the total one-year return is 43.46% for shareholders.
Adobe stock is beating the market, and it reports earnings next week. But does that make it a good buy today? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics…
✓ Earnings-per-Share (EPS) Growth: Adobe reported a recent EPS growth rate of 58.82%. That’s above the software industry average of 15.7%. That’s a great sign. Adobe’s earnings growth is outpacing that of its competitors.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the software industry is 63.99. And Adobe’s ratio comes in at 53.14. It’s trading at a better value than many of its competitors.
✓ Debt-to-Equity: The debt-to-equity ratio for Adobe stock is 24.83%. That’s below the software industry average of 60.33%. The company is less leveraged.
✓ Free Cash Flow per Share Growth: Adobe’s FCF has been higher than that of its competitors over the last year. That’s good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.
✓ Profit Margins: The profit margin of Adobe comes in at 23.69% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Adobe’s profit margin is above the software industry’s average of -21.07%. So that’s a positive indicator for investors.
✓ Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Adobe is 17.9%, and that’s above its industry average ROE of 11.68%.
Adobe stock passes six of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Strong Buy.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position of Wall Street analysts.