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Adobe Inc. (ADBE) Hit a 52 Week High, Can the Run Continue?
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Have you been paying attention to shares of Adobe Systems (ADBE - Free Report) ? Shares have been on the move with the stock up 35.3% over the past month. The stock hit a new 52-week high of $466.59 in the previous session. Adobe Systems has gained 34.9% since the start of the year compared to the 32.8% move for the Zacks Computer and Technology sector and the 35.1% return for the Zacks Computer - Software industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on March 15, 2023, Adobe reported EPS of $3.8 versus consensus estimate of $3.66 while it beat the consensus revenue estimate by 0.88%.
For the current fiscal year, Adobe is expected to post earnings of $15.43 per share on $19.22 billion in revenues. This represents a 12.55% change in EPS on a 9.19% change in revenues. For the next fiscal year, the company is expected to earn $17.34 per share on $21.34 billion in revenues. This represents a year-over-year change of 12.42% and 11.01%, respectively.
Valuation Metrics
Adobe may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Adobe has a Value Score of D. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 29.4X current fiscal year EPS estimates, which is a premium to the peer industry average of 26.5X. On a trailing cash flow basis, the stock currently trades at 35.1X versus its peer group's average of 23.1X. Additionally, the stock has a PEG ratio of 2.2. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Adobe currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Adobe passes the test. Thus, it seems as though Adobe shares could have a bit more room to run in the near term.
How Does ADBE Stack Up to the Competition?
Shares of ADBE have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Blackbaud, Inc. (BLKB - Free Report) . BLKB has a Zacks Rank of # 2 (Buy) and a Value Score of C, a Growth Score of B, and a Momentum Score of B.
Earnings were strong last quarter. Blackbaud, Inc. beat our consensus estimate by 4.35%, and for the current fiscal year, BLKB is expected to post earnings of $3.75 per share on revenue of $1.11 billion.
Shares of Blackbaud, Inc. have gained 3.6% over the past month, and currently trade at a forward P/E of 19.43X and a P/CF of 24.5X.
The Computer - Software industry is in the top 41% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ADBE and BLKB, even beyond their own solid fundamental situation.
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Adobe Inc. (ADBE) Hit a 52 Week High, Can the Run Continue?
Have you been paying attention to shares of Adobe Systems (ADBE - Free Report) ? Shares have been on the move with the stock up 35.3% over the past month. The stock hit a new 52-week high of $466.59 in the previous session. Adobe Systems has gained 34.9% since the start of the year compared to the 32.8% move for the Zacks Computer and Technology sector and the 35.1% return for the Zacks Computer - Software industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on March 15, 2023, Adobe reported EPS of $3.8 versus consensus estimate of $3.66 while it beat the consensus revenue estimate by 0.88%.
For the current fiscal year, Adobe is expected to post earnings of $15.43 per share on $19.22 billion in revenues. This represents a 12.55% change in EPS on a 9.19% change in revenues. For the next fiscal year, the company is expected to earn $17.34 per share on $21.34 billion in revenues. This represents a year-over-year change of 12.42% and 11.01%, respectively.
Valuation Metrics
Adobe may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Adobe has a Value Score of D. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 29.4X current fiscal year EPS estimates, which is a premium to the peer industry average of 26.5X. On a trailing cash flow basis, the stock currently trades at 35.1X versus its peer group's average of 23.1X. Additionally, the stock has a PEG ratio of 2.2. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Adobe currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Adobe passes the test. Thus, it seems as though Adobe shares could have a bit more room to run in the near term.
How Does ADBE Stack Up to the Competition?
Shares of ADBE have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Blackbaud, Inc. (BLKB - Free Report) . BLKB has a Zacks Rank of # 2 (Buy) and a Value Score of C, a Growth Score of B, and a Momentum Score of B.
Earnings were strong last quarter. Blackbaud, Inc. beat our consensus estimate by 4.35%, and for the current fiscal year, BLKB is expected to post earnings of $3.75 per share on revenue of $1.11 billion.
Shares of Blackbaud, Inc. have gained 3.6% over the past month, and currently trade at a forward P/E of 19.43X and a P/CF of 24.5X.
The Computer - Software industry is in the top 41% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ADBE and BLKB, even beyond their own solid fundamental situation.