Topics Growth Stocks

Adobe Systems Inc. $98 - Nasdaq symbol ADBE

ADOBE SYSTEMS INC. $98 (Nasdaq symbol ADBE; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 499.0 million; Market cap: $48.9 billion; Price-to-sales ratio: 9.2; No dividends paid since June 2005; TSINetwork Rating: Average; www.adobe.com) continues to benefit from rising demand for its online subscription services, particularly the Creative Cloud package of photoediting and desktop-publishing programs.

In its fiscal 2016 second quarter, which ended June 3, 2016, the company earned $0.71 a share. That was up 47.9% from $0.48 a year earlier. Revenue jumped 20.4%, to a record $1.40 billion from $1.16 billion.

In the latest quarter, revenue from Adobe’s Creative Cloud service jumped 37.0% from a year earlier. It is also seeing strong demand for its newer cloud-based offerings, including Document Cloud. That lets users create, manage and sign online documents for a monthly fee. Revenue from the company’s software to make online ads more effective — Marketing Cloud— gained 18.0%.

Adobe continues to spend a high 17% of its revenue on research. The investment helps it compete in a rapidly changing industry. However, the stock trades at an expensive 34.3 times the $2.86 a share the company will likely earn for fiscal 2016.

Adobe is a hold.

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Pat McKeough

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