In September of 2022, Adobe (ADBE 0.87%) announced plans to acquire Figma, a digital design collaboration company. Immediately after that was announced, multiple regulators voiced their concerns with the deal since Figma was seen as a direct competitor to Adobe for some of its products.

However, regulators can rest easy, as the two parties have mutually agreed to end the acquisition talks. This merger was a part of some investors' thesis for Adobe, and with the deal ripped up, some might wonder what they should do with their shares. Although this was an unfortunate ending to this plan, the company still looks like a strong investment.

All investors didn't applaud the Figma purchase

This deal wasn't loved by all investors. Immediately after the planned deal was announced, Adobe's stock plummeted 17%. That's a bad reaction for an acquisition announcement, but it came from one part of the deal: Figma's price tag.

Adobe agreed to acquire Figma for $20 billion, valuing the company at around 50 times sales. That's a sky-high price to pay, and investors didn't like it. Furthermore, it would be funded through a combination of cash and stock, which would have effectively wiped out all of the share repurchases over the past five years.

But all that is now irrelevant, and the company will have to pay $1 billion to Figma as a breakup fee. Still, investing in Adobe has its merits.

Adobe is still doing well by itself

For a while, the investment thesis for Adobe has been: Market-average revenue growth combined with share buybacks fuels market-beating earnings growth. The fourth quarter of fiscal 2023 (ending Dec. 1) was an example of that.

Revenue rose 12% year over year to $5.05 billion, while earnings per share (EPS) increased from $2.53 to $3.26 (a 29% rise). The company achieved this in a few ways:

  1. Operating expenses increased 9% compared to 12% revenue growth. With expenses rising slower than revenue, Adobe can increase its earnings faster than it can grow its top line.
  2. In one year, it repurchased around 10 million shares. This reduced the shares outstanding, which boosted its EPS figure.

While there were some other one-time effects, the slow expense growth and share repurchases combined to produce market-crushing earnings growth. This has been management's strategy for a while and will continue into 2024.

For fiscal 2024, it expects about $21.4 billion in revenue and EPS of $13.65. That would represent a 10% revenue hike and 16% EPS growth.

So, with Adobe expected to have another strong year, its stock looks like a great buy. The stock is a tad pricey at 50 times earnings, but that is right around its average valuation since 2016 (when it switched to the subscription business model).

As a result, even though the Figma acquisition fell through, the stock still looks like a great buy at these levels. With Adobe still excelling in the digital media world and its artificial intelligence products, shareholders have much more to look forward to.