You've heard of paper profits but how about ePaper profits? Healthy growth in its ePaper business helped fuel a solid third quarter for Adobe (NASDAQ:ADBE). Earnings per share shot up by 42% to $0.27 as revenue grew by 12% to $319.1 million for the quarter. The software specialist had apparently set its bar pretty low when it guided investors to expect net income in the $0.22- $0.25-a-share range.
If you've ever seen a document with a PDF extension, you're probably familiar with the company's Acrobat product line. Many of our FoolMart premium research products use Acrobat -- or the freely distributed Reader software -- to view. You've also probably seen more than a few graphics generated by Adobe Photoshop. But what exactly is an ePaper? It's not a failing grade on your college mid-term.
In Adobe's world, speed and simplification are the keys to making a business grow. The company's ePaper solutions help bridge the gap between traditional paper and digital documents. So marrying the immediate delivery gratification of the online medium with the portability and markup benefits of paper, ePaper makes business move faster -- and cheaper. FedEx (NYSE:FDX) can't be too happy about all this, right?
Adobe's ePaper offerings are starting to catch on -- to the tune of a 62% jump in sales during the quarter. Successful software companies reap the benefits of lofty margins and Adobe is no exception. Third-quarter net and gross margins clocked in at 20% and 93%, respectively.
Things are looking even better for Adobe in the fourth quarter, where the company sees sequential improvement and is looking to earn between $0.31 and $0.32 a share on $330 million to $350 million in revenue.
The market likes what it has seen from Adobe. The shares have quietly doubled over the past year. With the company now set to earn at least $1.08 this fiscal year and trading at roughly 35 times, you won't find too many people shouting "bargain" at these levels; however, given its strong profit growth and wide margins, it's little wonder you have to pay a premium for Adobe.
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