Adobe's (ADBE) - Get Report shares have lost their panache of late, and its shares have pulled back 15% from its highs. Looking over the past twelve months, its shares are up just over 5%. What are investors anxious about? Slightly weaker-than-anticipated Q4 guidance.

Strong buying opportunities in Adobe are infrequent, but right now investors are being presented with a margin of safety.

Short-Term Investors In The Driving Seat

Adobe has consistently delivered 22%-24% revenue growth rates. But the moment its guidance dipped slightly, investors started to become anxious over Adobe's future prospects. How much is Adobe actually guiding to, though? Twenty-one percent revenue growth, which is still terrific and enviable revenue growth.

Consequently, for all intents and purposes, investors can look to Adobe's Q4 marginal slow down as a prospective buying opportunity. To get some perspective, in the past Adobe was largely a one-trick pony, a document editing company. Today, Adobe is meaningfully more diversified than it has ever been in the past.

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Adobe's Digital Media Segment includes Photoshop, Illustrator and the Acrobat family. But Adobe's Digital Experience segment has a completely different offering, which is focused on connectivity, analytics and marketing endeavors. There is close to no overlap between these two segments. 

Moreover, this latter segment, though smaller, is growing at a slightly faster rate and is guided for 23% revenue growth rates in Q4, versus the 20% revenue growth guide for Adobe's Digital Media segment.

Cash Flows Are Ringing Loud

Adobe has a very strong financial position with a net debt position of just $500 million. And given that Adobe has generated $1.8 billion of free cash flow since the start of 2019 (trailing 9 months), Adobe's debt is no hindrance on its ability to execute.

Given its strong and consistent cash flows, it could be said that Adobe is being very savvy  to keep a small amount of debt on its balance sheet and to instead focus on repurchasing its shares.

Adobe announced its large share repurchase program in May 2018 and to date has deployed $2.25 billion on repurchases. This program is currently expected to run until 2021 and still has $5.75 billion left to be repurchased.

Valuation - Reasonable Margin Of Safety

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The table above reminds investors that none of Adobe's peers are trading as cheaply as Adobe is right now. Also, let's remember that Adobe's rapidly growing Digital Experience segment contains the very exciting Magento unit -- this offering has huge overlap with the very highly-priced Shopify (SHOP) - Get Report .

On the one hand, it should be noted that Shopify is not only easier for merchants to set up as a Software-as-a-service offering (SaaS), whereas Magento is a more cumbersome, Platform-as-a-Service that's more expensive for sellers to get up and run, and less intuitive too. Nevertheless, there should not be as a big a pricing discrepancy between these two stocks, which are largely targeting the same space.

When we look at the peer group listed above, how many of them are able to boast of having 92% of their total revenue from recurring sources, and at the same time, being able to consistently grow their top line, all the while being attentive to their cash flow conversion rates? Realistically, only Adobe.

The Bottom Line

Adobe's CEO Shantanu Narayen reminds investors that Adobe's revenue growth, cash flow and operating profit differentiate Adobe from other SaaS companies -- and this is difficult to disagree with.

For now, non-discerning investors are rotating out of any cloud-based stocks which have delivered strong returns over the past  five years. But investors seeking a rewarding, well-managed, cash flow-generating asset should look no further than ADBE.