Intrinsic value of Adobe Inc. - ADBE

Previous Close

$306.87

  Intrinsic Value

$180.61

stock screener

  Rating & Target

sell

-41%

Previous close

$306.87

 
Intrinsic value

$180.61

 
Up/down potential

-41%

 
Rating

sell

We calculate the intrinsic value of ADBE stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 150.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  22.80
  21.02
  19.42
  17.98
  16.68
  15.51
  14.46
  13.51
  12.66
  11.90
  11.21
  10.59
  10.03
  9.52
  9.07
  8.66
  8.30
  7.97
  7.67
  7.40
  7.16
  6.95
  6.75
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
Revenue, $m
  11,089
  13,420
  16,026
  18,906
  22,060
  25,481
  29,166
  33,107
  37,299
  41,736
  46,414
  51,327
  56,474
  61,852
  67,464
  73,309
  79,393
  85,719
  92,295
  99,129
  106,231
  113,612
  121,284
  129,261
  137,560
  146,195
  155,186
  164,552
  174,313
  184,490
Variable operating expenses, $m
  6,751
  8,147
  9,708
  11,434
  13,323
  15,373
  17,581
  19,942
  22,453
  25,112
  27,806
  30,750
  33,833
  37,055
  40,417
  43,919
  47,564
  51,354
  55,294
  59,388
  63,642
  68,064
  72,660
  77,440
  82,411
  87,585
  92,971
  98,582
  104,430
  110,527
Fixed operating expenses, $m
  701
  717
  732
  748
  765
  782
  799
  816
  834
  853
  872
  891
  910
  930
  951
  972
  993
  1,015
  1,037
  1,060
  1,083
  1,107
  1,132
  1,156
  1,182
  1,208
  1,235
  1,262
  1,289
  1,318
Total operating expenses, $m
  7,452
  8,864
  10,440
  12,182
  14,088
  16,155
  18,380
  20,758
  23,287
  25,965
  28,678
  31,641
  34,743
  37,985
  41,368
  44,891
  48,557
  52,369
  56,331
  60,448
  64,725
  69,171
  73,792
  78,596
  83,593
  88,793
  94,206
  99,844
  105,719
  111,845
Operating income, $m
  3,637
  4,556
  5,585
  6,724
  7,971
  9,326
  10,786
  12,349
  14,012
  15,772
  17,736
  19,686
  21,730
  23,867
  26,096
  28,418
  30,836
  33,350
  35,964
  38,681
  41,505
  44,440
  47,492
  50,665
  53,966
  57,402
  60,980
  64,708
  68,593
  72,645
EBITDA, $m
  3,978
  4,947
  6,031
  7,230
  8,544
  9,972
  11,509
  13,155
  14,906
  16,760
  18,715
  20,769
  22,922
  25,172
  27,519
  29,965
  32,511
  35,159
  37,912
  40,773
  43,747
  46,837
  50,051
  53,392
  56,869
  60,487
  64,255
  68,180
  72,271
  76,538
Interest expense (income), $m
  0
  223
  338
  470
  616
  778
  956
  1,148
  1,355
  1,577
  1,813
  2,062
  2,325
  2,602
  2,891
  3,194
  3,509
  3,838
  4,180
  4,536
  4,906
  5,290
  5,690
  6,105
  6,536
  6,985
  7,452
  7,938
  8,443
  8,970
  9,519
Earnings before tax, $m
  3,414
  4,218
  5,115
  6,108
  7,193
  8,371
  9,638
  10,994
  12,435
  13,959
  15,674
  17,361
  19,129
  20,975
  22,902
  24,909
  26,998
  29,170
  31,428
  33,775
  36,215
  38,750
  41,387
  44,129
  46,981
  49,951
  53,043
  56,265
  59,623
  63,126
Tax expense, $m
  922
  1,139
  1,381
  1,649
  1,942
  2,260
  2,602
  2,968
  3,357
  3,769
  4,232
  4,688
  5,165
  5,663
  6,184
  6,725
  7,289
  7,876
  8,486
  9,119
  9,778
  10,463
  11,174
  11,915
  12,685
  13,487
  14,322
  15,191
  16,098
  17,044
Net income, $m
  2,492
  3,079
  3,734
  4,459
  5,251
  6,111
  7,036
  8,025
  9,077
  10,190
  11,442
  12,674
  13,964
  15,312
  16,718
  18,184
  19,708
  21,294
  22,943
  24,656
  26,437
  28,288
  30,212
  32,214
  34,296
  36,464
  38,721
  41,073
  43,525
  46,082

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  23,054
  27,900
  33,317
  39,306
  45,862
  52,976
  60,636
  68,830
  77,545
  86,770
  96,494
  106,709
  117,409
  128,591
  140,257
  152,410
  165,058
  178,210
  191,882
  206,090
  220,855
  236,199
  252,149
  268,734
  285,987
  303,940
  322,633
  342,104
  362,396
  383,554
Adjusted assets (=assets-cash), $m
  23,054
  27,900
  33,317
  39,306
  45,862
  52,976
  60,636
  68,830
  77,545
  86,770
  96,494
  106,709
  117,409
  128,591
  140,257
  152,410
  165,058
  178,210
  191,882
  206,090
  220,855
  236,199
  252,149
  268,734
  285,987
  303,940
  322,633
  342,104
  362,396
  383,554
Revenue / Adjusted assets
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
  0.481
Average production assets, $m
  7,019
  8,495
  10,144
  11,968
  13,964
  16,130
  18,462
  20,957
  23,610
  26,419
  29,380
  32,490
  35,748
  39,153
  42,704
  46,405
  50,256
  54,260
  58,423
  62,749
  67,244
  71,916
  76,773
  81,822
  87,075
  92,542
  98,233
  104,161
  110,340
  116,782
Working capital, $m
  -3,282
  -3,972
  -4,744
  -5,596
  -6,530
  -7,542
  -8,633
  -9,800
  -11,041
  -12,354
  -13,738
  -15,193
  -16,716
  -18,308
  -19,969
  -21,700
  -23,500
  -25,373
  -27,319
  -29,342
  -31,444
  -33,629
  -35,900
  -38,261
  -40,718
  -43,274
  -45,935
  -48,707
  -51,597
  -54,609
Total debt, $m
  6,268
  8,696
  11,410
  14,411
  17,695
  21,259
  25,097
  29,202
  33,568
  38,190
  43,062
  48,179
  53,540
  59,142
  64,987
  71,076
  77,412
  84,002
  90,851
  97,969
  105,366
  113,054
  121,045
  129,354
  137,998
  146,992
  156,357
  166,112
  176,279
  186,879
Total liabilities, $m
  11,550
  13,978
  16,692
  19,692
  22,977
  26,541
  30,378
  34,484
  38,850
  43,472
  48,343
  53,461
  58,822
  64,424
  70,269
  76,357
  82,694
  89,283
  96,133
  103,251
  110,648
  118,336
  126,327
  134,636
  143,279
  152,274
  161,639
  171,394
  181,561
  192,161
Total equity, $m
  11,504
  13,922
  16,625
  19,614
  22,885
  26,435
  30,257
  34,346
  38,695
  43,298
  48,150
  53,248
  58,587
  64,167
  69,988
  76,053
  82,364
  88,927
  95,749
  102,839
  110,206
  117,863
  125,822
  134,098
  142,707
  151,666
  160,994
  170,710
  180,836
  191,394
Total liabilities and equity, $m
  23,054
  27,900
  33,317
  39,306
  45,862
  52,976
  60,635
  68,830
  77,545
  86,770
  96,493
  106,709
  117,409
  128,591
  140,257
  152,410
  165,058
  178,210
  191,882
  206,090
  220,854
  236,199
  252,149
  268,734
  285,986
  303,940
  322,633
  342,104
  362,397
  383,555
Debt-to-equity ratio
  0.540
  0.620
  0.690
  0.730
  0.770
  0.800
  0.830
  0.850
  0.870
  0.880
  0.890
  0.900
  0.910
  0.920
  0.930
  0.930
  0.940
  0.940
  0.950
  0.950
  0.960
  0.960
  0.960
  0.960
  0.970
  0.970
  0.970
  0.970
  0.970
  0.980
Adjusted equity ratio
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499
  0.499

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,492
  3,079
  3,734
  4,459
  5,251
  6,111
  7,036
  8,025
  9,077
  10,190
  11,442
  12,674
  13,964
  15,312
  16,718
  18,184
  19,708
  21,294
  22,943
  24,656
  26,437
  28,288
  30,212
  32,214
  34,296
  36,464
  38,721
  41,073
  43,525
  46,082
Depreciation, amort., depletion, $m
  341
  391
  446
  506
  573
  645
  723
  806
  895
  988
  979
  1,083
  1,192
  1,305
  1,423
  1,547
  1,675
  1,809
  1,947
  2,092
  2,241
  2,397
  2,559
  2,727
  2,903
  3,085
  3,274
  3,472
  3,678
  3,893
Funds from operations, $m
  2,834
  3,469
  4,180
  4,965
  5,824
  6,756
  7,759
  8,831
  9,972
  11,178
  12,421
  13,757
  15,155
  16,617
  18,142
  19,730
  21,384
  23,103
  24,890
  26,748
  28,678
  30,685
  32,771
  34,941
  37,199
  39,549
  41,996
  44,545
  47,203
  49,975
Change in working capital, $m
  -609
  -690
  -771
  -853
  -933
  -1,013
  -1,091
  -1,167
  -1,241
  -1,313
  -1,384
  -1,454
  -1,523
  -1,592
  -1,661
  -1,730
  -1,801
  -1,873
  -1,947
  -2,023
  -2,102
  -2,185
  -2,271
  -2,361
  -2,456
  -2,556
  -2,661
  -2,772
  -2,889
  -3,012
Cash from operations, $m
  3,443
  4,159
  4,951
  5,818
  6,757
  7,769
  8,849
  9,998
  11,213
  12,492
  13,806
  15,211
  16,679
  18,209
  19,803
  21,461
  23,184
  24,975
  26,837
  28,771
  30,780
  32,870
  35,042
  37,303
  39,655
  42,105
  44,657
  47,318
  50,092
  52,987
Maintenance CAPEX, $m
  -191
  -234
  -283
  -338
  -399
  -465
  -538
  -615
  -699
  -787
  -881
  -979
  -1,083
  -1,192
  -1,305
  -1,423
  -1,547
  -1,675
  -1,809
  -1,947
  -2,092
  -2,241
  -2,397
  -2,559
  -2,727
  -2,903
  -3,085
  -3,274
  -3,472
  -3,678
New CAPEX, $m
  -1,299
  -1,475
  -1,649
  -1,824
  -1,996
  -2,166
  -2,332
  -2,495
  -2,654
  -2,809
  -2,961
  -3,110
  -3,258
  -3,405
  -3,552
  -3,700
  -3,851
  -4,005
  -4,163
  -4,326
  -4,495
  -4,672
  -4,856
  -5,050
  -5,253
  -5,466
  -5,691
  -5,928
  -6,178
  -6,442
Cash from investing activities, $m
  -1,490
  -1,709
  -1,932
  -2,162
  -2,395
  -2,631
  -2,870
  -3,110
  -3,353
  -3,596
  -3,842
  -4,089
  -4,341
  -4,597
  -4,857
  -5,123
  -5,398
  -5,680
  -5,972
  -6,273
  -6,587
  -6,913
  -7,253
  -7,609
  -7,980
  -8,369
  -8,776
  -9,202
  -9,650
  -10,120
Free cash flow, $m
  1,954
  2,450
  3,019
  3,656
  4,362
  5,137
  5,980
  6,888
  7,860
  8,896
  9,964
  11,122
  12,338
  13,613
  14,946
  16,337
  17,787
  19,296
  20,865
  22,497
  24,193
  25,956
  27,789
  29,694
  31,675
  33,736
  35,881
  38,115
  40,442
  42,867
Issuance/(repayment) of debt, $m
  2,143
  2,428
  2,714
  3,001
  3,284
  3,564
  3,838
  4,105
  4,366
  4,622
  4,872
  5,118
  5,361
  5,602
  5,845
  6,089
  6,336
  6,589
  6,850
  7,118
  7,397
  7,687
  7,991
  8,309
  8,643
  8,995
  9,365
  9,755
  10,166
  10,600
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  2,143
  2,428
  2,714
  3,001
  3,284
  3,564
  3,838
  4,105
  4,366
  4,622
  4,872
  5,118
  5,361
  5,602
  5,845
  6,089
  6,336
  6,589
  6,850
  7,118
  7,397
  7,687
  7,991
  8,309
  8,643
  8,995
  9,365
  9,755
  10,166
  10,600
Total cash flow (excl. dividends), $m
  4,097
  4,878
  5,733
  6,657
  7,647
  8,701
  9,817
  10,993
  12,227
  13,518
  14,836
  16,239
  17,699
  19,215
  20,790
  22,426
  24,123
  25,885
  27,715
  29,615
  31,590
  33,644
  35,780
  38,003
  40,318
  42,731
  45,246
  47,870
  50,608
  53,467
Retained Cash Flow (-), $m
  -2,142
  -2,418
  -2,703
  -2,989
  -3,271
  -3,550
  -3,822
  -4,089
  -4,349
  -4,603
  -4,852
  -5,097
  -5,339
  -5,580
  -5,821
  -6,064
  -6,311
  -6,563
  -6,822
  -7,090
  -7,367
  -7,657
  -7,959
  -8,276
  -8,609
  -8,959
  -9,328
  -9,716
  -10,126
  -10,558
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  1,955
  2,460
  3,029
  3,668
  4,376
  5,152
  5,995
  6,904
  7,878
  8,915
  9,984
  11,142
  12,359
  13,635
  14,969
  16,361
  17,812
  19,322
  20,893
  22,526
  24,223
  25,987
  27,821
  29,727
  31,709
  33,772
  35,918
  38,154
  40,482
  42,909
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  1,875
  2,252
  2,636
  3,020
  3,392
  3,739
  4,050
  4,315
  4,525
  4,674
  4,741
  4,755
  4,699
  4,578
  4,395
  4,158
  3,876
  3,558
  3,217
  2,862
  2,505
  2,156
  1,823
  1,514
  1,234
  985
  771
  590
  442
  323
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Adobe Systems Incorporated is a software company. The Company offers products and services used by professionals, marketers, knowledge workers, application developers, enterprises and consumers for creating, managing, delivering, measuring, optimizing and engaging with compelling content and experiences. It operates through three segments: Digital Media, Digital Marketing, and Print and Publishing. Its Digital Media segment provides tools and solutions that enable individuals, small and medium businesses and enterprises to create, publish, promote and monetize their digital content. Its Digital Marketing segment provides solutions and services for how digital advertising and marketing are created, managed, executed, measured and optimized. Its Print and Publishing segment addresses market opportunities ranging from the diverse authoring and publishing needs of technical and business publishing to its legacy type and original equipment manufacturer (OEM) printing businesses.

FINANCIAL RATIOS  of  Adobe Inc. (ADBE)

Valuation Ratios
P/E Ratio 89.3
Price to Sales 20.7
Price to Book 17.9
Price to Tangible Book
Price to Cash Flow 51.9
Price to Free Cash Flow 55.3
Growth Rates
Sales Growth Rate 24.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -12.7%
Cap. Spend. - 3 Yr. Gr. Rate 3.8%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 22.2%
Total Debt to Equity 22.2%
Interest Coverage 0
Management Effectiveness
Return On Assets 12.4%
Ret/ On Assets - 3 Yr. Avg. 9.5%
Return On Total Capital 17.2%
Ret/ On T. Cap. - 3 Yr. Avg. 12.5%
Return On Equity 21.3%
Return On Equity - 3 Yr. Avg. 15.6%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 86.2%
Gross Margin - 3 Yr. Avg. 85.5%
EBITDA Margin 33.7%
EBITDA Margin - 3 Yr. Avg. 30.5%
Operating Margin 29.7%
Oper. Margin - 3 Yr. Avg. 24.7%
Pre-Tax Margin 29.3%
Pre-Tax Margin - 3 Yr. Avg. 24%
Net Profit Margin 23.2%
Net Profit Margin - 3 Yr. Avg. 18.8%
Effective Tax Rate 20.8%
Eff/ Tax Rate - 3 Yr. Avg. 22.4%
Payout Ratio 0%

ADBE stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the ADBE stock intrinsic value calculation we used $9030 million for the last fiscal year's total revenue generated by Adobe Inc.. The default revenue input number comes from 0001 income statement of Adobe Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our ADBE stock valuation model: a) initial revenue growth rate of 22.8% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for ADBE is calculated based on our internal credit rating of Adobe Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Adobe Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of ADBE stock the variable cost ratio is equal to 61.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $686 million in the base year in the intrinsic value calculation for ADBE stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Adobe Inc..

Corporate tax rate of 27% is the nominal tax rate for Adobe Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the ADBE stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for ADBE are equal to 63.3%.

Life of production assets of 30.1 years is the average useful life of capital assets used in Adobe Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for ADBE is equal to -29.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $9362.114 million for Adobe Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 489.128 million for Adobe Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Adobe Inc. at the current share price and the inputted number of shares is $150.1 billion.

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