Adobe Inc. (NASDAQ: ADBE)

Sector: Technology Industry: Software - Application CIK: 0000796343
Market Cap 146.69 Bn
P/B 12.46
P/E 21.08
P/S 6.33
ROIC (Qtr) 37.39
Div Yield % 0.00
Rev 1y % (Qtr) 10.72
Total Debt (Qtr) 6.64 Bn
Debt/Equity (Qtr) 0.56

About

Adobe Inc., known simply as Adobe, is a global technology company that has been at the forefront of the industry for over four decades. With a mission to "change the world through personalized digital experiences," Adobe offers a range of products and services that are used by individuals, teams, businesses, and enterprises across the globe. The company's offerings enable users to create, manage, deliver, measure, optimize, and engage with content across various surfaces and platforms. Adobe's business activities are centered around two primary...

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Price action

Investment thesis

Bull case

  • Strong operating cash flow of 9.79B provides robust 1.48x coverage of total debt 6.64B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 4.98B provide 67.32x coverage of short-term debt 74M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 9.79B provides exceptional 39.64x coverage of interest expenses 247M, showing strong debt service capability.
  • Robust free cash flow of 9.60B exceeds capital expenditure of 193M by 49.74x, indicating strong organic growth funding capability.
  • Retained earnings of 43.52B provide full 6.63x coverage of long-term debt 6.56B, indicating strong internal capital position.

Bear case

  • Operating cash flow of 9.79B barely covers its investment activities of (1.02B), with a coverage ratio of -9.58, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Investment activities of (1.02B) provide weak support for R&D spending of 4.20B, which is -0.24x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 4.98B provide limited coverage of acquisition spending of (17M), which is -293.06x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating cash flow of 9.79B provides insufficient coverage of deferred revenue obligations of 6.53B, which is 1.50x, raising concerns about future service delivery capabilities.
  • Retained earnings of 43.52B provide limited buffer against comprehensive income items of (341M), which is -127.61x, indicating elevated exposure to market risks.

Geographical Breakdown of Revenue (2024)

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Software - Application
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 SAP Sap Se 281.21 Bn 33.75 6.55 10.73 Bn
2 CRM Salesforce, Inc. 248.88 Bn 34.46 6.17 11.14 Bn
3 SHOP Shopify Inc. 217.18 Bn 121.94 20.30 1.12 Bn
4 UBER Uber Technologies, Inc 182.87 Bn 10.99 3.69 12.19 Bn
5 INTU Intuit Inc. 182.36 Bn 44.28 9.38 6.78 Bn
6 NOW ServiceNow, Inc. 151.53 Bn 87.54 11.96 2.40 Bn
7 ADBE Adobe Inc. 146.69 Bn 21.08 6.33 6.64 Bn
8 ADP Automatic Data Processing Inc 108.05 Bn 26.12 5.17 9.77 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 5.16 2.68
EV to Cash from Ops. EV/CFO 15.15 13.34
EV to Debt EV to Debt 22.35 57.60
EV to EBIT EV/EBIT 17.03 19.20
EV to EBITDA EV/EBITDA 15.99 15.11
EV to Free Cash Flow [EV/FCF] EV/FCF 15.45 14.78
EV to Market Cap EV to Market Cap 1.01 -93.16
EV to Revenue EV/Rev 6.40 4.63
Price to Book Value [P/B] P/B 12.46 4.29
Price to Earnings [P/E] P/E 21.08 -132.44
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 -3.95
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 4.25
Dividend per Basic Share Div per Share (Qtr) 0.00 0.15
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 2.52
Interest Coverage Int. cover (Qtr) 35.26 -52.32
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -6.04 -259.78
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -30.74 9,763.58
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 1.61
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 30.74 -263.15
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 25.24 56.46
EBIT Growth (1y) % EBIT 1y % (Qtr) 26.29 -225.15
EBT Growth (1y) % EBT 1y % (Qtr) 25.39 -86.10
EPS Growth (1y) % EPS 1y % (Qtr) 35.13 123.84
FCF Growth (1y) % FCF 1y % (Qtr) 46.55 -36.82
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 11.26 95.08
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.81 0.58
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.02
Cash Ratio Cash Ratio (Qtr) 0.54 3.75
Current Ratio Curr Ratio (Qtr) 1.02 8.16
Debt to Equity Ratio Debt/Equity (Qtr) 0.56 0.17
Interest Cover Ratio Int Coverage (Qtr) 35.26 -52.32
Times Interest Earned Times Interest Earned (Qtr) 35.26 -52.32
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 41.30 -100.06
EBIT Margin % EBIT Margin % (Qtr) 37.57 -164.24
EBT Margin % EBT Margin % (Qtr) 36.50 -116.94
Gross Margin % Gross Margin % (Qtr) 89.10 58.20
Net Profit Margin % Net Margin % (Qtr) 30.00 -121.65