May 25, 2023
Top 10 Stock Adobe Strong Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Adobe – Top 10 Stock in Employee Satisfaction Leaders in the United States
Adobe is listed as a top 10 stock on May 25, 2023 in the market index Employee Focus US because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is safely financed and the professional investor sentiment is positive. Both are encouraging signals for a stock purchase decision, albeit at an above-average share price. Based on the Obermatt 360° View of 80 (top 80% performer), Obermatt assesses an overall strong buy recommendation for Adobe on May 25, 2023.
Snapshot: Obermatt Ranks
| Country | USA |
| Industry | Application Software |
| Index | Employee Focus US, Diversity USA, Renewables Users, NASDAQ 100, NASDAQ, S&P 500 |
| Size class | XX-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° Assessment Adobe Strong Buy
| 360 METRICS | May 25, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 38 |
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| GROWTH | ||||||||
| GROWTH | 35 |
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| SAFETY | ||||||||
| SAFETY | 93 |
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| SENTIMENT | ||||||||
| SENTIMENT | 78 |
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| 360° VIEW | ||||||||
| 360° VIEW | 80 |
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ANALYSIS: With an Obermatt 360° View of 80 (better than 80% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock Adobe are very positive. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for Adobe. The consolidated Sentiment Rank has a good rank of 78, which means that professional investors are more optimistic about the stock than for 78% of alternative investment opportunities. It also rates well regarding its financing structure, with the consolidated Safety Rank at 93 or better than 93% of its peers when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the stock is expensive and expects low growth. The consolidated Value Rank is only 38, meaning that the share price of Adobe is on the high side, compared with indicators such as revenues, profits, and invested capital. The company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth,and stock returns, with its Growth Rank at 35. ...read more
RECOMMENDATION: With a 360° View of 80, Adobe is better than 80% of all alternative stock investment opportunities based on the Obermatt Method. As only half of the consolidated Obermatt Ranks exhibit excellent performance, namely the positive professional market sentiment (Sentiment Rank of 78) and safe financing practices (Safety Rank of 93), the case for investing in this stock needs further thought. The Value and the Safety Ranks are below average. The Safety Rank is the least critical of the four consolidated ranks, because it only reflects financing practices. So the question is: How to assess below-average value against above-average sentiment? This may be a case where growth is in the future, not yet reflected in current performance. Companies that might fall into this category are those with intellectual property, such as technology and pharmaceutical companies. In early phases, they are expensive relative to their size and have a lot of capital on their books, as is the case here. Investors expect a better future and are willing to pay a higher price than is warranted by the current company size. These higher prices drive stock price value down in the short term. In this case, future growth may be the strongest driver of the investment case, reflected by institutional investors' opinions. With a weak Value Rank, the question is how much to sacrifice value at the cost of positive sentiment. Sometimes market sentiment is just hype, but sometimes it is right. You pay more than market-average for this stock, but it may be worth it, if the future of Adobẹ is bright. Prudent investors may only want to invest a smaller portion of their wealth in such situations. Young investors can carry more risk but should still thrive for sufficient diversification. ...read more
Sentiment Strategy: Professional Market Sentiment for Adobe very positive
ANALYSIS: With an Obermatt Sentiment Rank of 78 (better than 78% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock Adobe is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for Adobe. Analyst Opinions are at a rank of 43 (worse than 57% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. Worse, Analyst Opinions Change has a rank of 49, which means that stock research experts are getting even more pessimistic. Other sentiment indicators are positive: The Professional Investors rank is 98, which means that professional investors hold more stock in this company than in 98% of alternative investment opportunities. So, pros tend to favor investing in this company. In addition, Market Pulse has a rank of 83, which means that the current professional news and professional social networks tend to be positive when discussing this company (more positive news than for 83% of competitors). While stock research analysts are getting ever more critical, many professional investors are committed to Adobe and the professional news channels are on the positive side. ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 78 (more positive than 78% compared with investment alternatives), Adobe has a reputation among professional investors that is significantly higher than that of its competitors. This is an ambiguous picture: analysts are negative and getting even more critical, while the news in the market is positive. Who should investors believe? This is a difficult question in such a situation. Investors should proceed cautiously and verify not only the financial performance in the Obermatt Value, Growth and Safety Ranks but also independent news coverage of the company. ...read more
Value Strategy: Adobe Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 38 (worse than 62% compared with alternatives), Adobe shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with three out of four indicators below average for Adobe. Only Price-to-Profit (also referred to as price-earnings, P/E) indicates good stock value with a rank of 79, which means that the stock price compared with what market professionals expect for future profits is lower than for 79% of comparable companies, indicating a good value concerning Adobe's profit levels. But Price-to-Sales is 17 which means that the stock price compared with what market professionals expect for future profits is higher than for 83% of comparable companies, indicating a low value concerning Adobe's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 26 and for dividend yield, which is lower than for 99% of comparable companies, making the stock more expensive compared with the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 38, is a HOLD recommendation based on Adobe's stock price compared with the company's operational size and dividend yields. Can we rely on only one good value indicator? Only if we know the company well. In this case, a high Price-to-Profit Rank, while Price-to-Sales and Price-to-Book are both below the market typical levels, means that the company can charge higher prices for its products and needs less capital to produce them. If this is sustainable, then Adobe is a good investment because profits count most in enterprise valuations. The low dividend yield indicates that the company is confident it can do something with the generated cash that is more valuable than paying the profits out to the shareholders in the form of dividends. ...read more
Growth Strategy: Adobe Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 35 (better than 35% compared with alternatives), Adobe shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with three out of four indicators below average for Adobe. Only Capital Growth has a good rank of 69, which means that currently professionals expect the company to grow its invested capital more than 32% of its competitors. The other three indicators are pointing South: Sales Growth has a rank of 36 which means that currently professionals expect the company to grow less than 64% of its competitors. Profit Growth with a rank of 32 and Stock Returns with a rank of 45 are also low (below 55% of alternative investments). ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 35, is a HOLD recommendation for growth and momentum investors. The good news from the invested capital side is surprising. A company with disappointing revenues, profits, and disappointed shareholders typically doesn't invest above average. Overall, the growth momentum for Adobe is thus negative. As it is intriguing to see that company executives are optimistic about their investment policy, it is worthwhile looking into the details of the capital investment projects. They may indicate future growth and profits and thus if accompanied by a good value, a sign of good timing to invest in the stock. ...read more
Safety Strategy: Adobe Debt Financing Safety very solid
| SAFETY METRICS | May 25, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 64 |
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| REFINANCING | ||||||||
| REFINANCING | 27 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 98 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 93 |
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ANALYSIS: With an Obermatt Safety Rank of 93 (better than 93% compared with alternatives) for 2023, the company Adobe has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of Adobe is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with two out of three indicators above average for Adobe. Leverage is at a rank of 64, meaning the company has a below-average debt-to-equity ratio. It has less debt than 64% of its competitors. Liquidity is also good at a rank of 98, meaning the company generates more profit to service its debt than 98% of its competitors. This indicates that the company is on the safer side when it comes to debt service. But Refinancing is lower at a rank of 27, which means that the portion of the debt that is about to be refinanced is above-average. It has more debt in the refinancing stage than 73% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 93 (better than 93% compared with alternatives), Adobe has a financing structure that is significantly safer than that of its competitors. The refinancing issues could be a short-term problem, especially if the company has reputation issues. Banks and investors don't like to refinance debt if there are clouds on the horizon. For this reason, investors should look at the refinancing environment for Adobe. Does it look safe that debt that is coming due can be covered with new debt? If that is the case, then the financing situation of the company is on the safer side. If not, it may be better to wait until refinancing has been completed and the Refinancing rank is good again. ...read more
Combined financial peformance: Adobe Top Financial Performance
| COMBINED PERFORMANCE | May 25, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 38 |
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| GROWTH | ||||||||
| GROWTH | 35 |
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| SAFETY | ||||||||
| SAFETY | 98 |
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| COMBINED | ||||||||
| COMBINED | 88 |
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ANALYSIS: With an Obermatt Combined Rank of 88 (better than 88% compared with investment alternatives), Adobe (Application Software, USA) shares have much better financial characteristics than comparable stocks. Shares of Adobe are low in value (priced high) with a consolidated Obermatt Value Rank of 38 (worse than 62% of alternatives) and show below-average growth (Growth Rank of 35) but are safely financed (Safety Rank of 93), which means low debt burdens. ...read more
RECOMMENDATION: An Obermatt Combined Rank of 88, is a strong buy recommendation based on Adobe's financial characteristics. As the company Adobe's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 38) and low growth (Obermatt Growth Rank of 35), it is a somewhat questionable stock investment, where the risk of paying too much for the shares is significant, unless the company has an exceptionally bright future. In this case, good financing practices (Obermatt Safety Rank of 93) are a positive sign, because it may allow the company to weather challenging times until the hoped-for cash flows materialize. This may be true for high-tech or biotechnology companies with enough cash to sustain prolonged business development. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and unattractive today. In such cases, the Obermatt Method has limited value, as it is based on facts we can observe today. If the facts lie all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that account for a small fraction of a safe portfolio. ...read more
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