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.
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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.