ADBE 559.05 (+0.25%)
US00724F1012SoftwareSoftware - Infrastructure

Last update on 2024-06-05

Adobe (ADBE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 9/9)

Adobe achieves a perfect 9/9 Piotroski F-Score in 2023, demonstrating strong financial stability, profitability, and robust cash flows.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 9

We're running Adobe (ADBE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The analysis of Adobe (ADBE) based on the Piotroski F-Score reveals a robust financial standing. Adobe has achieved a perfect Piotroski score of 9 out of 9, signifying strong profitability, liquidity, and operational efficiency. Key positive indicators include a positive net income of $5.428 billion in 2023, consistent profitability growth over the past 20 years, and a strong positive cash flow from operations. The company demonstrates effective use of its assets, with an increasing Return on Assets (ROA) and an operating cash flow that surpasses its net income. Adobe also shows decreasing leverage, an improving current ratio, and reducing share count, all indicating better financial health and shareholder value. Additionally, Adobe's increasing gross margin and asset turnover ratio reflect operational efficiency and strong competitive positioning within the industry.

Insights for Value Investors Seeking Stable Income

Based on Adobe's perfect Piotroski F-Score of 9, it strongly suggests that this stock is worth considering for investment. The company exhibits excellent financial health, strong profitability, and efficient operations, all of which are positive signals for investors. Adobe's consistent growth in net income and operating cash flow, along with strong asset utilization and operational management, make it an attractive option for those looking to invest in a well-positioned and financially stable company. Therefore, it is recommended to look into Adobe's stock further for potential investment opportunities.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Adobe (ADBE)

Company has a positive net income?

Net income, also known as net profit, represents the amount of revenue that remains after all expenses, including taxes and operating costs, have been subtracted from total revenue. For Adobe, this figure reveals whether the company is profitable or not, making it a critical criterion in financial analysis.

Historical Net Income of Adobe (ADBE)

Adobe's net income for 2023 stands at $5.428 billion, which is a positive number. This suggests that the company is profitable. Over the last 20 years, Adobe has demonstrated significant growth in its net income, starting from $266 million in 2003 and reaching $5.428 billion in 2023. Given this upward trend, it's clear that Adobe has been consistently increasing its profitability over the years. The net income in 2009 saw a drop to $386 million, likely due to the global financial crisis; however, the company has recovered well since then. The positive net income for 2023 assigns a score of 1 point in the Piotroski F-Score for this criterion. This strong and consistent net income growth reflects Adobe's robust business model and efficient management.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's core business operations. A positive CFO suggests that a company is generating enough cash to sustain and grow its operations from its core business, which is generally a positive indicator of financial health.

Historical Operating Cash Flow of Adobe (ADBE)

Adobe's (ADBE) CFO for the year 2023 is $7,302,000,000, which is significantly positive. This is a strong indicator of the company’s ability to generate ample cash from its ongoing operations. When we look at the trend over the past 20 years, the CFO has been mostly positive and increasing, from $433.14 million in 2003 to $7.3 billion in 2023. The increasing trend, especially the jump from $4.44 billion in 2019 to $7.3 billion in 2023, reflects Adobe's robust business model and its capability to continuously generate rising operating cash flow. Therefore, Adobe earns 1 point in this aspect of the Piotroski analysis, reflecting good financial health in its operational cash flows.

Return on Assets (ROA) are growing?

Return on Assets (ROA) calculates how efficiently a company generates profit from its assets. An increasing ROA indicates improving efficiency and profitability, which is a positive sign for investors.

Historical change in Return on Assets (ROA) of Adobe (ADBE)

In 2023, Adobe's ROA increased to 0.1906 from 0.1748 in 2022. This upward trend in ROA is a positive indicator, reflecting Adobe's enhanced ability to generate profit from its assets compared to the previous year. With an increase of 0.0158, Adobe effectively utilized its asset base to boost profitability, which favorably positions the firm relative to its operational capacity. On a broader spectrum, when observing the last 20 years, Adobe maintains a trend aligning with industry performance, showcasing resilience and strategic asset management over the long term. This accomplishment merits an additional point in the Piotroski F-score methodology.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is a positive indicator of financial health. It suggests efficient cash management where a company generates more cash from its core operations than it records as net income.

Historical accruals of Adobe (ADBE)

Adobe (ADBE) has an Operating Cash Flow (OCF) of $7,302 million and Net Income of $5,428 million for the year 2023. Since OCF is higher than Net Income, it signifies that Adobe is generating strong cash flow from its operational activities, which is a positive indicator for the company's financial health. This core strength ensures that Adobe can cover its operational expenses, reinvest in business growth, and likely offer shareholder returns. Over the last 20 years, Adobe's OCF has grown remarkably from $433 million in 2003 to $7,302 million in 2023, exhibiting a compounded annual growth rate (CAGR) of approximately 16.4%. On the other hand, Net Income has also seen substantial growth from $266 million in 2003 to $5,428 million in 2023, showing a CAGR of around 17.1%. The point for this criterion is awarded as 1.

Liquidity of Adobe (ADBE)

Leverage is declining?

Leverage compares a company's debt relative to its equity. A decrease often signifies better financial stability.

Historical leverage of Adobe (ADBE)

The leverage of Adobe (ADBE) has decreased slightly from 0.1489 in 2022 to 0.1346 in 2023. This indicates a reduction in the company's use of debt relative to its equity, which suggests improved financial stability and lower financial risk. Over the past 20 years, Adobe's leverage has seen various fluctuations, reaching a peak in 2010 at 0.1859. The current decrease aligns with a positive trend toward lower financial leverage, thereby adding 1 point to the Piotroski score for this criterion.

Current Ratio is growing?

The current ratio is a measure of a company's ability to pay short-term obligations with its current assets. A higher ratio is preferable as it indicates better liquidity.

Historical Current Ratio of Adobe (ADBE)

Comparing the Current Ratio of Adobe, we see an increase from 1.1068 in 2022 to 1.3434 in 2023. This positive trend suggests that Adobe's liquidity position has improved, enabling it to better meet its short-term obligations. Historically, Adobe's Current Ratio has trended below the industry's median in recent years. For instance, in 2023 Adobe's ratio of 1.3434 is below the industry median of 1.5348, though it is a noticeable improvement from its lower ratio in 2022. This indicates the company is performing better than its past performance but still lags behind the industry standard. Overall, the increase in the current ratio in 2023 is a favorable sign and would thus earn a point in the Piotroski analysis.

Number of shares not diluted?

Change in Shares Outstanding measures if the company is diluting shareholders or reducing share count, impacting equity value.

Historical outstanding shares of Adobe (ADBE)

The outstanding shares for Adobe fell from 470 million in 2022 to 457 million in 2023. This marks a decrease of 2.77%, illustrating a positive trend for shareholders, as fewer shares outstanding suggests share buybacks, which typically enhance per-share metrics and can signal management's confidence in the company's financial strength. Over the last 20 years, Adobe has predominantly reduced its share count, enhancing shareholder value consistently.

Operating of Adobe (ADBE)

Cross Margin is growing?

Change in Gross Margin represents the trend in profitability from core business operations. It signals how efficiently the company is producing and selling its products compared to past periods. For Adobe, evaluating this criterion is critical because it helps understand the company's competitive edge in the software industry, which often relies on high-margin products for sustained growth.

Historical gross margin of Adobe (ADBE)

For Adobe (ADBE), the Gross Margin in 2022 was 0.877, while in 2023, it increased slightly to 0.8787. This marked a minor improvement in Gross Margin, adding 1 point according to the criterion. Specifically, this uptick, albeit minor, is a positive indicator suggesting that Adobe has managed to either reduce production costs or increase the revenue from its product offerings more efficiently year-over-year. Moreover, examining historical data, we can say Adobe has maintained consistently high gross margins, well above the industry median, which indicates strong competitive positioning. Adobe's Gross Margin in 2023 is still far superior to the industry median of approximately 0.715, reinforcing Adobe's efficiency in operational management and its ability to sustain profitability at elevated levels.

Asset Turnover Ratio is growing?

Assess the change in Asset Turnover for Adobe (ADBE) is crucial as it reflects the efficiency with which the company uses its assets to generate sales. An increase is a positive indicator.

Historical asset turnover ratio of Adobe (ADBE)

The Asset Turnover ratio for Adobe (ADBE) has increased from 0.6472 in 2022 to 0.6817 in 2023. This positive change reflects an improvement in Adobe's ability to efficiently utilize its assets to generate revenue, marking an upward trend in operational performance. Over the past 20 years, Adobe's highest Asset Turnover was in 2003 at 0.9934, and it saw considerable decreases before stabilizing and improving after 2012. Therefore, this increase of 0.0345 from 2022 to 2023 (a 5.33% rise) is beneficial and adds one point to Adobe's Piotroski F-score, indicating a favorable trend in asset utilization.


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