Adobe Systems (ADBE) Highlighted As Today's Perilous Reversal Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Adobe Systems ( ADBE) as a "perilous reversal" (up big yesterday but down big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Adobe Systems as such a stock due to the following factors:

  • ADBE has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $256.5 million.
  • ADBE has traded 3.4 million shares today.
  • ADBE is down 3.1% today.
  • ADBE was up 9% yesterday.

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More details on ADBE:

Adobe Systems Incorporated operates as a diversified software company worldwide. It operates in three segments: Digital Media, Digital Marketing, and Print and Publishing. ADBE has a PE ratio of 148.6. Currently there are 10 analysts that rate Adobe Systems a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Adobe Systems has been 3.3 million shares per day over the past 30 days. Adobe Systems has a market cap of $34.8 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.20 and a short float of 1.2% with 1.63 days to cover. Shares are up 16.5% year-to-date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Adobe Systems as a buy. 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, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Software industry average. The net income increased by 12.2% when compared to the same quarter one year prior, going from $65.32 million to $73.29 million.
  • ADBE's revenue growth trails the industry average of 27.3%. Since the same quarter one year prior, revenues slightly increased by 3.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although ADBE's debt-to-equity ratio of 0.22 is very low, it is currently higher than that of the industry average. To add to this, ADBE has a quick ratio of 1.73, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $400.27 million or 27.07% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 11.86%.
  • 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 27.63% 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.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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