My latest column is up at RealMoney. You can read the full article there, but here is a summary:
Adobe has also generated nearly $1.5 billion in free cash flow over the last 12 months, which gives it a free-cash-flow-to-enterprise-value-yield of more than 9%. That is nearly a 400% premium to the five-year Treasury yield.
Of course, the last six months have shown that attractive valuations can get you nowhere (or even put you in the hole). That is why the catalyst provided by the likely release of Creative Suite 4 becomes so important.
If Creative Suite 4 pans out like any of the last three product cycles, investors should start getting excited about it sometime between now and July. With consensus 2009 earnings estimates already at $2.07, a P/E expansion to 30 times gives a potential target of $62, up from a current $35.
If the thesis continues to play out, I’ll be able to stop kicking myself for jumping the gun.
Disclosure: William Trent owns shares of Adobe (ADBE)
