Creative software maker Adobe Systems (ADBE) - Get Adobe Inc. Report has always been richly valued.

With shares trading at all-time highs, some traders are looking to book profits. That is understandable because they have scored gains of 16% in just six months.

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But it may prove to be a foolish long-term decision.

The company's strong fiscal third-quarter results weren't a one-off. With its Creative Cloud and Digital Media segments displaying incredible growth, the company has been able to maintain a successful and long track record of beating analyst expectations.

If Adobe Systems surpasses fiscal fourth-quarter estimates, the stock could touch new highs.

Credit Suisse and Goldman Sachs are bullish. Here are three reasons should investors should be, too.

1. Rosy fiscal fourth-quarter outlook. It is difficult for growth investors not to love Adobe Systems. Ten consecutive quarters of rising revenue aren't very common, but that is just what Adobe Systems has delivered.

In the fiscal third quarter, total revenue of $1.46 billion marked 20% year-over-year growth. And the company's Digital Media segment revenue of $990 million and its Creative Cloud segment revenue of $803 million, which was up 39% year over year, were particularly stunning.

As with Microsoft, Adobe Systems' software-as-a-service model has posted annualized recurring revenue of $3.7 billion or $285 million quarter-over-quarter growth.

Unlike Amazon, whose loss-making retail operations are masked by a growing cloud business, technology peer Adobe Systems has shown great improvement in operating income. In the fiscal third quarter alone, this increased by 36% year over year.

For the fiscal fourth quarter, Adobe Systems is projecting revenue of $1.55 billion to $1.6 billion, more than the 21.2% growth expected by analysts. This lays the groundwork for another market-beating quarter, and when Wall Street figures this out, the stock should rise still higher.

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2. Strong cash flow. The scorching pace of growth in the creative and marketing cloud areas has led to steady growth in the company's cash generation.

Adobe Systems has a cash balance of more than $4.3 billion. And though it carries debt of $1.92 billion, this is manageable.

The company's cash flow from operations ballooned by 44% year over year, according to Seeking Alpha

Although earnings per share can be a function of any increase in stock-based compensation or share buybacks -- Adobe is certainly no stranger to this as its share count was 612 million in 2006, and it has been reduced to 506 million -- cash flow comes from solid business.

Operating cash flow is nearing $500 million per quarter. With earnings set to grow by 30% annually for the next five years, expect free cash flow to rise substantially.

Trading at a price-earnings-growth ratio of 1.19, even Adobe Systems at lifetime highs is cheap, given its earnings growth potential.

Database giant Oracle (1.92) or Enterprise software leader SAP (1.45) are much costlier options. This is why Adobe Systems remains a buy-and-hold tech stock for investors who want solid growth at a reasonable valuation.

3. Unique portfolio. Adobe Systems isn't just about Photoshop. Its Creative Cloud, Document Cloud and Marketing Cloud solutions have shown explosive growth.

As one of the most innovative software companies in the world, Adobe Systems has been able to create a deep and wide economic moat around itself. There are many alternatives -- even free ones -- but the company's offerings promise an unmatched level of quality.

This is why the company has been blazing past earnings expectations.


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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.