NEW YORK (TheStreet) -- Shares of Adobe Systems (ADBE) are down 0.44% to $69.96 after RBC Capital downgraded the computer software company to 'outperform' from 'sector perform' with a price target of $82.
The firm lowered its ratings on the company due to analysts seeing little earnings upside potential.
TheStreet Ratings team rates ADOBE SYSTEMS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate ADOBE SYSTEMS INC (ADBE) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Software industry average. The net income increased by 15.7% when compared to the same quarter one year prior, going from $76.55 million to $88.53 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 11.8%. Since the same quarter one year prior, revenues slightly increased by 5.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- ADBE's debt-to-equity ratio is very low at 0.23 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, ADBE has a quick ratio of 1.74, which demonstrates the ability of the company to cover short-term liquidity needs.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 50.24% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- ADOBE SYSTEMS INC has improved earnings per share by 13.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ADOBE SYSTEMS INC reported lower earnings of $0.57 versus $1.66 in the prior year. This year, the market expects an improvement in earnings ($1.23 versus $0.57).
- You can view the full analysis from the report here: ADBE Ratings Report