Guru Ken Heebner (Trades, Portfolio) is a value investor who follows the same basic principles as Warren Buffett (Trades, Portfolio). He invests in companies that he understands. During the third quarter, Heebner purchased 468,000 shares of Adobe Systems (ADBE, Financial). Since the trade, Adobe Systems has gained an estimated 6%.
Adobe Systems has a market cap of $53.13 billion, a price-earnings ratio of 54.51, an enterprise value of $50.6 billion, a price-book ratio of 7.30 and a quick ratio of 2.16.
Adobe Systems was founded in 1982 and is one of the largest and most diversified software companies in the world. The company was incorporated in California in October of 1983 and was reincorporated in Delaware in May of 1997.
The company provides digital media with its tools, services and solutions that enable individuals, schools, businesses and enterprises to create, publish and promote their content around the world. It also provides digital marketing.
According to GuruFocus, Adobe Systems has a 7 of 10 financial strength rating with a cash-debt ratio of 2.32 and an equity to asset ratio of 0.59. The Altman Z-Score of 8.13 indicates the company is in the safe zone and not in danger of filing for bankruptcy in the near future.
Adobe Systems also has a 7 of 10 profitability and growth rating. It has an operating margin of 23.62%, a net margin of 17.86%, a return on equity (ROE) of 13.99%, a return on capital (ROC Joel Greenblatt (Trades, Portfolio)) of 168.63% and three-year revenue growth of 2.60%.
Ken Heebner (Trades, Portfolio) likely established a position in Adobe Systems for the following reasons:
- The company has multiple streams of income through its cloud-based subscription services that it offers to clients, which increases the probability the company will be able to generate revenue and continue to generate gross profit in the future.
- The company has an excellent Piotroski F-Score, indicating Adobe Systems is in a very healthy business situation.
- The company increased its revenue from $1.966 million in November 2005 to $5,552 million over the previous trailing 12-months, an annual estimated increase of 11% over the previous 10 years.
- The company has increased its gross profit from $1,854 million in November 2005 to $4,748 million over the previous trailing 12-months, an annual estimated increase of 9.9% over the previous 10 years.
- The company has over 30 years of operating experience.
Below is a Peter Lynch chart that shows Adobe Systems is trading above its intrinsic value.
Disclosure:Â Author does not own any shares of this company.
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