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Adobe Systems (ADBE) Gains But Lags Market: What You Should Know

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In the latest trading session, Adobe Systems (ADBE - Free Report) closed at $390.44, marking a +0.2% move from the previous day. This change lagged the S&P 500's 0.82% gain on the day. Elsewhere, the Dow gained 1.05%, while the tech-heavy Nasdaq added 0.59%.

ADBE will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $2.35, up 28.42% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $3.17 billion, up 15.65% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $9.79 per share and revenue of $12.98 billion. These totals would mark changes of +24.4% and +16.19%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for ADBE. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. ADBE is currently a Zacks Rank #3 (Hold).

Valuation is also important, so investors should note that ADBE has a Forward P/E ratio of 39.82 right now. This represents a premium compared to its industry's average Forward P/E of 32.41.

Also, we should mention that ADBE has a PEG ratio of 2.49. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Computer - Software was holding an average PEG ratio of 2.49 at yesterday's closing price.

The Computer - Software industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 120, putting it in the top 48% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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