Adobe Systems Incorporated (ADBE): Are You Invested?

Page 1 of 2

Adobe Systems Incorporated (NASDAQ:ADBE) failed to make our list of top ten tech stocks loved by hedge funds last quarter, but we believe it is one of the best investments available in the software and programming industry. Adobe saw its most recent fiscal quarter (4Q) come in with higher revenue, as a result of better adoption rates for cloud computing services. The company has a diverse suite of products that should help drive interim growth, and a bullish IT environment in the U.S. and Europe certainly won’t hurt.

SAC CAPITAL ADVISORS

Adobe is leading the way in the field of paperwork digitization and record-keeping, and almost all of its revenues come from licensing fees. Given a large portion of its revenues are from this arena, Adobe enjoys a much higher EBITDA margin than its peers at 34%. Adobe also has billionaire Steven Cohen of SAC Capital as one of its big-name investors; Cohen upped his stake by 400% last quarter (see Steven Cohen’s top picks).

Weakness in one of Adobe’s largest markets, Europe, forced it to fall below $20 in 2009, but the stock has since rebounded and is up 30% year to date. Adobe has impressive product lines that sport an average life cycle of about 24 months, allowing for higher lifetime revenue per customer. Adobe trades relatively cheap when compared to major peers at only 15 times forward earnings, which is also well below its five-year average P/E of 20x.

From a top line standpoint, Adobe trades at 4.2 times sales, where the average of its major peers is around 5.1x. If shares of the company did trade more in line with its peers, there’s an upside price of around $43 – 13% higher than its current trading price.

Looking at one of Adobe’s key competitors, Autodesk, Inc. (NASDAQ:ADSK) is a design and drafting software company that appears to present another solid ‘growth at a reasonable price’ opportunity. Autodesk offers investors one of the best expected EPS growth rates at 17%, and sports a bargain-bin sales multiple of at 3.4x. After a near 25% slide from its high of $42.69 earlier this year, Autodesk now trades at a measly PEG of 1.0. In the third quarter, billionaire Dan Loeb took a new, rather large stake in Autodesk (see Dan Loeb’s newest picks here).

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!