Investment Opportunities

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.


Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth. For more details, click here.

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