ADOBE SYSTEMS INC. $76.03 - Nasdaq symbol ADBE

ADOBE SYSTEMS INC. $76.03 (Nasdaq symbol ADBE; TSINetwork Rating: Average) (408-536-6000; www.adobe.com; Shares outstanding: 500.3 million; Market cap: $38.0 billion; No dividends paid) makes software that lets computer users create, edit and share documents in the popular PDF format. Graphic designers also use its programs to create print publications and web pages.

In its fiscal 2015 first quarter, which ended February 27, 2015, Adobe earned $0.44 a share, up 46.7% from $0.30 a year earlier. Revenue gained 10.9%, to $1.11 billion from $1.00 billion.

Like Symantec, Adobe is shifting from selling software as a one-time purchase and toward a subscription model. It now gets 70% of its revenue from recurring sources, up from 52% a year ago.

As of February 27, 2015, Adobe had 4.0 million subscribers to its Creative Cloud service. It aims to increase that to 5.9 million by the end of fiscal 2015.

The company continues to spend a high 20% of its revenue on research, which helps it compete in its rapidly changing industry. However, the stock trades at 36.2 times the $2.10 a share that Adobe will likely earn in fiscal 2015. That’s a high p/e ratio for a company that mainly serves clients in cyclical businesses like publishing.

Adobe is still a hold.

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One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to its sales, earnings or assets), then hold on to them as mainstream investors recognize the value and push up the share price.

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