Adobe (ADBE:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Adobe(ADBE:NAS)

Technology:Software-Application

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$254.35 (USD) 06/02/2019

Weighted Valuation
$285.01 (USD)

Overall Rating
Undervalued by 12.1%

Valuation Models Analyst Consensus: $290.14 (USD)
(in order of importance) Multiples: $277.31 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (ADBE:NAS USD)

Price 254.35
Range 250.71 – 255.93
52 week 185.16 – 275.49
Open 255.06
Vol / Avg. 2.46M/3.13M
Mkt cap 124.05B
P/E 48.91
Div/yield 0.00/0.00
EPS 5.20
Shares 487.73M
Beta 1.15

Company Description

Adobe Systems Inc is a diversified software-as-a-service vendor that operates in two main strategic segments: digital media and digital experience. In digital media, the firm sells Creative Cloud, which is composed of a variety of software for developers, designers, photographers, and videographers, such as Photoshop, Lightroom, Illustrator, Adobe XD, InDesign, Adobe Premiere Pro, Dimension, After Effects, and Adobe Stock. Adobe’s digital experience segment, sold through Experience Cloud, is composed of Marketing Cloud, Analytics Cloud, and Advertising Cloud. These products allow enterprises to launch multichannel marketing campaigns, build brands, and gain customer insights. A minority of revenue comes from Adobe’s publishing segment.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for ADBE:NAS

Using a discounted cash flow model we generated an intrinsic value of $184.39 (USD) for ADBE:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

ADBE:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $184.39 1% 5% 1% 5%
WACC (or Ke) 9.96 $216.73 $160.19
Terminal Growth Rate 3.00 $163.17 $212.73
Tax Rate 0.07 $193.93 $174.85
Cash Flow 7,390,456,000 $175.37 $193.42
Capital Expenditures -184,799,000 $184.20 $184.59
Long Term Debt 1,916,591,000 $184.59 $184.19

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $0.00 (USD) for ADBE:NAS. We also generated a valuation of $191.23 (USD) using other metrics and comparables.
The comparable companies were Autodesk (ADSK:NAS), Salesforce.com (CRM:NYS), Intuit (INTU:NAS), ServiceNow (NOW:NYS) and Red Hat (RHT:NYS).

Company ADBE:NAS End Date Value
Earnings/Share $5.20 (USD)
Book Value/Share $0.00 (USD)
Sales/Share $0.00 (USD)
Cash Flow/Share $0.00 (USD)
EBITDA/Share $6.49 (USD)
Price Based on Comps Adjustment Factor (%)
$0.00 (USD) -15.3
$0.00 (USD) -19.9
$0.00 (USD) 76.1
($8.29) (USD) -51.9
$0.00 (USD) 21.3
ADBE:NAS Ratios Used Average Values ADSK:NAS CRM:NYS INTU:NAS NOW:NYS RHT:NYS
0.00 PE Ratio 0.00 0.00 0.00 0.00 0.00 0.00
0.00 PB Ratio 35.50 0.00 0.00 0.00 35.50 0.00
0.00 PS Ratio 15.00 0.00 0.00 0.00 15.00 0.00
0.00 PCF Ratio 48.24 0.00 0.00 0.00 48.24 0.00
0.00 EV to EBITDA 236.44 0.00 0.00 0.00 236.44 0.00

Multiples

Using a multiples approach we generated a valuation of  $277.31 (USD) for ADBE:NAS

Company ADBE:NAS End Date Value
Earnings/Share $5.20 (USD)
Book Value/Share $0.00 (USD)
Sales/Share $0.00 (USD)
Cash Flow/Share $0.00 (USD)
EBITDA/Share $6.49 (USD)
Price Based on Comps Adjustment Factor
$314.42 (USD) 0
$0.00 (USD) 0
$0.00 (USD) 0
$0.00 (USD) 0
$240.19 (USD) 0
Ratios Ratio Average
PE Ratio 60.47
PB Ratio 7.56
PS Ratio 10.25
PCF Ratio 30.42
EV to EBITDA 37.02

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  ADBE:NAS for the last 10 years was  7.31

We ran the Adjusted Book Value for  ADBE:NAS and generated a book value of  $19.20 (USD)
By multiplying these we get an adjusted valuation of  $140.42 (USD)

Analyst Data

In the Stockcalc database there are 7 analysts that provide a valuation for ADBE:NAS. The 7 analysts have a concensus valuation for ADBE:NAS for 2019 of $290.14 (USD).

ADBE:NAS Adobe

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
7 2 0 4.5000 Outperform 2019-2-5

Current Price: 254.35 USD

Analyst Consensus
USD Millions 2019 2020 2021
Mean EPS 7.81 9.58 11.42
# EPS Analysts 10 9 3
Mean Revenue 11,093.00 13,157.90 15,179.50
# Revenue Analysts 8 7 3
Mean Target Price 290.14
Mean Cash Flow 9.45 11.31 12.89
Mean EBITDA 4,808.50 6,088.50 7,175.20
Mean Net Income 3,900.00 4,841.10 6,193.20
Mean Debt Outstanding -1,640.00 -5,829.90 -13,838.80
Mean Tax Rate 10.05 13.00 18.00
Mean Growth Rate 26.58
Mean Capital Expenditure 290.30 317.50 327.40

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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