A Board Member Bought 5,000 Shares of Adobe

Adobe’s peers in the application software business include Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NASDAQ:ORCL), and SAP AG (NYSE:SAP). SAP has similar valuation multiples to Adobe: its trailing price-to-earnings multiple, for example, is 24. In the third quarter of 2012, SAP reported somewhat higher revenue- though a sharp decline in net income- compared to the same period in 2011. Microsoft and Oracle, meanwhile trade at discounts to these two companies. If we look at forward P/Es then Microsoft’s discount is particularly large, though we would expect a pop to earnings in the next couple years from customers buying the new versions of Windows and Office. In addition, we worry that analysts may have overestimated sales figures particularly for Windows 8, making the company look cheaper on a forward basis than it would actually be. Still, we think it is worth watching for further developments. Oracle reported high earnings growth in its most recent quarterly report versus a year earlier, though revenue was up only slightly. That stock carries trailing and forward P/Es of 16 and 12, respectively. We’d note that Microsoft and Oracle both made our list of the ten most popular tech stocks among hedge funds for the third quarter of 2012.

Insider purchases are useful to know about, but shouldn’t be blindly followed as while they do beat the market on average, this is not always the case. Adobe doesn’t have an attractive valuation, including compared to some mega-cap software companies, and so we wouldn’t advise investors to be buying the stock right now.

Disclosure: I own no shares of any stocks mentioned in this article.