Is Market Overlooking ADBE Right Now?

Here is why we think ADBE deserves consideration as a value stock.

• Reasonable Growth: 10.6% LTM and 10.6% last 3 year average.
• Cash Generative: Nearly 41.8% free cash flow margin and 36.4% operating margin LTM.
• No Major Shocks: ADBE has avoided any large revenue collapses.
• Modest Valuation: Despite encouraging fundamentals, ADBE trades at a PE multiple of 24.1
• Opportunity vs S&P: Compared to S&P, you get similar valuation but higher growth, and better margins

*LTM: Last Twelve Months

That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure

Does This Work?

For 65 similar value stocks chosen as of mid 2024, consider the following stats for the subsequent 1 year period.

• Average peak return of 39.3% vs 14.4% for S&P, with maximum peak return of 133%
• Win rate of 60%; win rate represents % of stocks with positive return
• Average 1-year return of 14.6%, similar to S&P’s despite tariff instability

But Consider The Risk

That said, Adobe has seen some serious drops in tough times. It fell about 72.5% during the Dot-Com crash and 67% in the Global Financial Crisis. During the 2022 inflation shock, the dip was around 60%. Even the less severe pullbacks, like in 2018 and the Covid pandemic, still wiped out about 25% of its value. So, despite all the good stuff going for it, Adobe isn’t immune when markets turn sour.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.