Is Adobe, Inc. overvalued or undervalued?

As of 17 October 2025, the valuation grade for Adobe, Inc. has moved from expensive to attractive, indicating a shift in perception regarding its market value. Based on the current metrics, Adobe appears to be undervalued, particularly when considering its P/E ratio of 35, which is lower than the peer average of 29.80 for companies like Microsoft Corp. at 36.17 and Salesforce, Inc. at 33.28. Additionally, Adobe's EV to EBITDA ratio stands at 26.66, while its PEG ratio is a favorable 1.18, suggesting that the company is well-positioned for growth relative to its price.
In comparison to its peers, Adobe's return on capital employed (ROCE) is notably high at 67.92%, and its return on equity (ROE) is also impressive at 52.06%. These strong performance metrics further support the notion that Adobe is undervalued in the current market. However, it is worth noting that Adobe's stock has underperformed against the S&P 500 across multiple time frames, with a year-to-date return of -25.06% compared to the S&P 500's 13.30%, which may reflect broader market sentiments.