Adobe (ADBE), mcap=$192bn, price $410 vs $377

– High-quality business with a long-term IRR of 16-17%. 90% GMs and 42% cashflow margins.
– Around 20% growth over the last two years.
– High ROIC=30% and high ROE=50%.
– Currently trades below historical multiples at 26xFCF.
– Down 34% YTD as the market is concerned about a slowdown in growth.

– Historically traded around 29-34x FCF multiple, now sits at 26x.
– Assuming 12% FCF growth, 1.5% share count reduction, and 3% entry FCF yield, results in a long-term target IRR of 16%-17%

Exp. gain: Long-term IRR of 16-17%

Full $ADBE write-up (free guest account required):

Leave a Comment