ADBE

Composite Snapshot: ADBE

Retrospective: 3-Year Competitive Position

Moat Trajectory: ▲ STRONG — Widening

Durability score of 79/100 combined with growth consistency of 74/100 suggests the company is actively widening its competitive moat. This is rare and indicates structural advantages.

Capital Deployment:

The company excels at capital allocation, with a returns composite of 86/100 and profitability composite of 90/100. This suggests management is deploying capital into high-return projects while maintaining pricing discipline.

ROIC of 38.6% meaningfully exceeds the sector benchmark of 10%, suggesting genuine competitive advantages.

Current Snapshot: Fundamental Reality

Earnings Quality Deep Dive:

Earnings quality is excellent. OCF/NI of 141% indicates cash generation exceeds reported earnings by 41pp — the gold standard for earnings reliability. Accruals ratio of -19.7% is well-contained.

Piotroski F-Score of 7/9: Good — majority of financial health indicators are positive.

Balance Sheet Reality:

The balance sheet shows some strain. Leverage composite of 62/100 combined with liquidity at 48/100 suggests the company is operating with tighter financial constraints.

D/E of 0.53x is conservative, with strong interest coverage (35.4x).

▸ Active Penalty Flags:

▼ Capex Starvation: The company is underinvesting relative to depreciation, which may impair future competitiveness.

Forward Outlook: Investment Thesis & Action

Investment Profile: COMPOUNDER

High-quality business (health: 75/100) with strong growth (10.5%) and excellent capital returns (86/100). This profile has historically generated the strongest long-term returns. Position size: Core holding.

Leading Indicators to Monitor:

• ▲ Margin trend is positive (+0.2pp) — watch for continuation
• Current ROIC (38.6%) exceeds 5-year average (28.4%) — improving capital efficiency
• 5-year revenue CAGR of 13.1% provides growth runway