The following ratings changes were generated on Wednesday, Oct. 22.

We've downgraded Adobe Systems, which offers creative, business and mobile software and services, from buy to hold. Strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, unimpressive growth in net income and weak operating cash flow.

Adobe's revenue growth of 4.2% since the same quarter last year trails the industry average of 16.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share. Its debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.57, which clearly demonstrates the ability to cover short-term cash needs. The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization.

The company, on the basis of change in net income, which has decreased by 6.6%, from the same quarter one year ago, has significantly underperformed compared to the Software industry average, but is greater than that of the S&P 500. Shares have plunged by 40.38% compared with where it was selling one year ago, apparently dragged down by the decline we have seen in the S&P 500 along with other factors. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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