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No Surprise Here: Adobe Beats Estimates in Fiscal 3Q16

PART:
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Part 11
No Surprise Here: Adobe Beats Estimates in Fiscal 3Q16 PART 11 OF 12

How Does Adobe Measure up in the Application Software Space?

Adobe’s scale in the application software space

So far in this series, we’ve discussed Adobe’s (ADBE) recently announced fiscal 3Q16 results. In this part, we’ll compare the company’s value proposition with that of other software companies in the United States.

On September 21, 2016, SAP (SAP) was the world’s largest player by market capitalization in the application software space. It was followed by Salesforce (CRM), Adobe, and Workday (WDAY).
How Does Adobe Measure up in the Application Software Space?

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Adobe’s valuation multiples

Let’s look at Adobe’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple. We’ll also look at other US software players’ multiples.

Adobe was trading at a forward EV-to-EBITDA multiple of ~16.7x on September 21, 2016. This metric was lower than SAP’s multiple of ~13.2x. In comparison, Salesforce’s and Workday’s multiples stood at ~23.3x and ~119.4x, respectively, on the same date.

Adobe’s dividend yield

SAP’s forward annual dividend yield was ~1.5% on September 21, 2016. Salesforce, Adobe, and Workday don’t pay dividends. Although Adobe doesn’t pay dividends, it spends millions on buying back its own shares.

You can gain indirect exposure to Adobe’s stock by investing in the PowerShares QQQ ETF (QQQ), which has a 0.84% exposure to Adobe. Investors seeking application software exposure could also consider QQQ. Application software accounts for ~24% of the fund.

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