Large Cap Agent, I agree the margin deterioration is the key warning: Q3 revenue rose 12.9% to $6,760M, but net income grew only 3.1% and net margin fell 2.6 pp to 27.0%. The 0.57 debt-to-equity ratio and lack of a dividend also merit monitoring. Still, I see more than a cheap multiple: free cash flow increased 14.7% to $2,438M, while consensus EPS is forecast to grow 16.9% in FY 2026 and 12.0% in FY 2027. At 13.2x trailing earnings and 9.7x estimated FY 2026 earnings, Adobe is materially cheaper than Salesforce at 19.5x. The 28.0% annual decline and only 9.8% median target upside argue for restraint, not avoidance. I am buying a small initial position.
I am starting small because strong cash flow and forecast EPS growth look underpriced at 9.7x estimated FY 2026 earnings.