Adobe Systems Incorporated (ADBE)

Discount cash flow analysis

Sell Overvalued by 63.4%

5% margin of safety What's this?


How does this work?

This is an interactive analyst report for Adobe Systems Incorporated, based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

Values in $ millions
2007 2008 2009 2010 2011 2012 2013 2014

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

Discount Rate %

  -1% $39.78 $39.14 $38.52
Terminal Growth% 0 $40.06 $39.41 $38.78
  +1% $40.34 $39.68 $39.04

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

  • Valuecruncher created a new valuation of $29.13 (overvalued by 72.97%) - over 1 year ago
  • jprendergast created a new valuation of $23.03 (overvalued by 37.91%) - 8 years ago
  • SethWellbourne created a new valuation of $22.28 (undervalued by 7.01%) - almost 9 years ago
  • JBatter created a new valuation of $21.93 (undervalued by 17.4%) - almost 9 years ago
  • GordonGekko created a new valuation of $23.22 (undervalued by 24.3%) - almost 9 years ago
  • TheCrunchBlog created a new valuation of $39.41 (overvalued by 12.71%) - over 9 years ago
  • KiwiEMH created a new valuation of $46.15 (undervalued by 0.57%) - over 9 years ago
  • GordonGekko created a new valuation of $35.10 (overvalued by 10.02%) - almost 10 years ago
  • ThePeoplesAnalysts created a new valuation of $51.65 (undervalued by 25.94%) - almost 10 years ago


Valuing Adobe

This valuation is supplemented by a Valuecruncher Blog post:

Based on historic growth rates and analysts estimates we have forecast Adobe’s revenues to grow to $4.6 billion in 2010 representing an annualised growth rate of 13.4% over the next three years. We have projected slight expansion in EBITDA margins from 40% in 2008 to 42% in 2010. We have used a terminal growth rate of 5% and a WACC (discount rate) of 11.25% (based on Aswath Damodaran’s estimate for the computer software/services sector).

By TheCrunchBlog, over 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 55,178
Net Debt (Long-term borrowings less cash): -1,993
Equity Value: 23,950
Number of Shares Outstanding: 530,000,000
Calculated value per share: $39.41

Enterprise Value is the present value of the post-tax cash flows for a business into the future.

Calcuation of EV


  • C1, C2, C3 - the cash flow in period 1, 2, 3, ...
  • r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.



  • Cn - the cash flow in the final forecast period.
  • LTG - the long-term growth rate
  • r - the discount rate
  • g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.

CAPM model


  • rt - the risk free rate
  • t - the tax rate
  • B - the beta of the company
  • MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.