ADBE Stock Study (10-28-25)

I recently did a stock study on Adobe Inc. (ADBE, $357.80). Previous studies are here and here.

CFRA writes:

     > Adobe (ADBE) is the largest provider of applications used
     > to produce visual content, best known for its Creative
     > Cloud apps, Photoshop (#1 in photo editing, raster
     > graphics), Illustrator (#1 in drawing, vector graphics),
     > InDesign (#1 in page layout), and Premiere Pro (#1 in
     > video editing). Its apps are used by graphic designers,
     > photographers, publishers, video producers, animators,
     > and other creative professionals… ADBE’s apps are also
     > used by students, hobbyists, and part-time artists.

Over the past decade, the large-size company has grown sales and EPS at annualized rates of 18.6% and 27.5%, respectively. Lines are up, mostly straight, and parallel with the exception of an EPS dip in ’21. Five- (10-) year EPS R^2 is 0.53 (0.87) and Value Line (VL) gives an Earnings Predictability score of 75.

Over the past decade, PTPM leads peer and industry averages while increasing from 18.2% (’15) to 32.2% (’24) with a last-5-year mean of 34.0%. ROE also leads peer and industry averages while increasing from 9.0% (’15) to 37.5% (’24) with a last-5-year mean of 36.3%. Debt-to-Capital is slightly less than peer and industry averages despite edging up from 21.4% (’15) to 30.0% (’24) with a last-5-year mean of 25.0%.

Quick Ratio is only 0.87 but Interest Coverage is 35 per M* who assigns “Wide” Economic Moat, rates the company Exemplary for Capital Allocation, and gives an A grade for Financial Health (per BI website). VL gives an A rating for Financial Strength.

With regard to sales growth:

• YF projects YOY 10.1% and 9.2% for ’25 and ’26, respectively (based on 34 analysts).
• Zacks also projects YOY 10.1% and 9.2% for ’25 and ’26 (12).
• VL projects 10.9% growth per year from ’24-’29.
• CFRA projects 8.6% and 8.8% per year for ’24-’26 and ’24-’27, respectively.
• M* offers a 2-year ACE estimate of 9.6% per year while projecting 5-year growth of 10.0%/year in analyst note.

My 8.0% forecast is below the range.

With regard to earnings growth:

• MarketWatch projects 12.4% and 13.1% per year from ’24-’26 and ’24-’27, respectively (based on 43 analysts).
• Nasdaq.com projects 13.4% YOY and 13.1% per year for ’26 and ’25-’27 (14, 6, and 6 analysts for ’25, ’26, and ’27).
• Seeking Alpha projects 4-year annualized growth of 14.4%.
• Argus projects 5-year annualized growth of 13.0%.
• Finviz projects 5-year annualized growth of 12.8% (11).
• LSEG gives LTG estimate of 13.6%.
• YF projects YOY 12.8% and 12.2% for ’25 and ’26, respectively (38).
• Zacks projects YOY 12.8% and 13.5% for ’25 and ’26, respectively (15), along with 5-year annualized growth of 13.1%.
• VL projects 16.0% growth per year from ’24-’29.
• CFRA projects 12.0% and 12.5% per year for ’24-’26 and ’24-’27 along with 3-year projected CAGR of 10.0%.
• M* has long-term ACE at 15.1% per year.

My 12.0% forecast is below the long-term-estimate range (mean of seven: 14.0%). Initial value is ’24 EPS of $12.36/share rather than 2025 Q3 EPS of $16.05 (annualized).

My Forecast High P/E is 35. Over the past 10 years, high P/E ranges from 47.9 in ’16 to 74.7 in ’15 with a last-5-year mean of 58.2 and a last-5-year-mean average P/E of 44.6. I am below the range and at upper end of my comfort zone.

My Forecast Low P/E is 23. Over the past 10 years, low P/E ranges from 23.6 in ’20 to 55.6 in ’15 with a last-5-year mean of 31.0. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $284.30 is default based on initial value given above. That is 20.5% less than the previous closing price and 13.2% less than the 52-week low.

These inputs land ADBE in the BUY zone with an U/D ratio of 5.5. Total Annualized Return (TAR) is 16.3%.

PAR (using Forecast Average—not High—P/E) is 12.0%: pretty solid for a large-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 241 studies done in the past 90 days (80 outliers and my study excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.0%, 11.1%, 32.0, and 21.0. I am higher on all but sales [a very rare occurrence]. VL projects a future average annual P/E of 23.0, which is less than MS (26.5) and less than mine (29.0).

MS high / low EPS are $25.17 / $15.13 versus my $21.78 / $12.36 (per share). My high EPS is less due to a lower initial value. VL is in the middle at $23.00.

MS LSPF of $296.90 implies a Forecast Low P/E of 19.6: less than the above-stated 21.0. MS LSPF is 6.6% less than the default $15.13/share * 21.0 = $317.73 resulting in more conservative zoning. MS LSPF is 4.4% greater than mine, however.

I think MOS is solid in this study because my inputs are near or below analyst estimates and historical ranges. My inputs are greater than MS but my EPS range is still lower and MS TAR (18.3%) is 2.0% per year greater than mine.

With regard to valuation, PEG is 1.3 and 1.7 per Zacks and my projected P/E, respectively: fairly valued (1.5 per M*). Relative Value [(current P/E) / 5-year-mean average P/E] is quite cheap at 0.5, however, and Kim Butcher’s “quick and dirty DCF” calculates a fair value 63% higher than current.

Per U/D, ADBE is a BUY under $403/share. BI TAR criterion is met [762.4 / ((14.87 / 100 ) +1 ) ^ 5] ~ $381 with a forecast high price ~$762 (no dividend).

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