High Margins, 43% Discount: Buy Adobe Stock Now

Adobe (ADBE) stock might be a good buy now. Why? Because you get high margins – reflective of pricing power and cash generation capacity – for a discounted price. Companies like this generate consistent, predictable profits and cash flows, which reduce risk and allow capital to be reinvested. The market tends to reward that.

What Is Happening With ADBE

ADBE stock is now 43% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago.

The stock may not reflect it yet, but here is what’s going well for the company: Adobe’s Q4 2025 delivered record operating cash flows exceeding $10 billion for FY2025, driven by expanding customer adoption of AI-powered features like Firefly. Monthly active users for complimentary AI services rose 35% to over 70 million. This AI-influenced Annual Recurring Revenue (ARR) now surpasses $8 billion. Strategic pricing adjustments for Creative Cloud Edition 4 and photography plans in 2025, along with revised individual app credit structures, reinforce recurring revenue streams. Remaining Performance Obligations also stand at $22.52 billion, providing clear revenue visibility. Adobe also projects over 10% total ARR growth for FY2026.

ADBE Has Strong Fundamentals

• Recent Profitability: Nearly 42.2% operating cash flow margin and 36.6% operating margin LTM.
• Long-Term Profitability: About 39.1% operating cash flow margin and 35.6% operating margin last 3-year average.
• Revenue Growth: Adobe saw growth of 10.5% LTM and 10.5% last 3-year average, but this is not a growth story
• Available At Discount: At P/S multiple of 5.1, ADBE stock is available at a 43% discount vs 1 year ago.

Below is a quick comparison of ADBE fundamentals with S&P medians.

*LTM: Last Twelve Months

Don’t Expect A Slam Dunk, Though

While ADBE stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. ADBE fell about 72% in the Dot-Com crash, 67% in the Global Financial Crisis, and 60% during the inflation shock in 2022. Even the less severe dips in 2018 and the Covid selloff came close to 25%. This shows that no matter how strong a company looks, it can still take major hits in tough markets. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ADBE Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

If you want more details, read Buy or Sell ADBE Stock.

How We Arrived At ADBE Stock

ADBE piqued our interest because it meets the following criteria:

1. Greater than $10 Bil in market cap
2. High CFO (cash flow from operations) margins or operating margins
3. Meaningfully declined in valuation over the past 1 year

But if ADBE doesn’t look good enough to you, here are other stocks that also check all these boxes:

1. T-Mobile US (TMUS)
2. Salesforce (CRM)
3. Abbott Laboratories (ABT)

Notably, a portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:

• Average 12-month forward returns of nearly 19%
• 12-month win rate (percentage of picks returning positive) of about 72%

Multi Asset Portfolios Offer More Upside With Less Risk

Stocks soar and sink but bonds commodities and other assets balance the ride. A multi asset portfolio keeps returns steadier and reduces single market risk.

The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices