Despite all the talk of constriction in the credit markets, Wall Street's buyback binge continues. The latest adherent to the "Corporation, buy thyself" philosophy is PDF specialist Adobe (NASDAQ:ADBE), which reported its fourth-quarter 2007 earnings Monday, then announced that it's buying back another 30 million shares.

That's on top of the 20 million shares that Adobe authorized buying back in April (of which 17.7 million have already been snapped up). It's also in addition to what Adobe openly admits is an "ongoing stock repurchase program initiated ... in 1998 to offset dilution from employee stock programs." Leaving the two previous buyback programs aside for the moment, this week's news means potentially $1.3 billion in new cash outlays to shrink Adobe's share count by roughly 5%. Can Adobe afford to spend so much on buybacks? And even if it can, should it?

Can it pay?
Indubitably. Adobe addressed this question head-on in the same press release that announced the buyback, assuring shareholders: "As of Nov. 30, 2007, Adobe had cash and cash equivalents of approximately $2 billion...." Moreover, and perhaps coincidentally, Adobe generated almost precisely $1.3 billion in free cash flow over the past 12 months. If it can maintain that pace in fiscal 2008, and if it picks its purchase prices prudently, the company could reduce its share count over the course of the coming year without dipping into its savings at all!

Should it pay?
That's a trickier question. Let's take a look at the prices Mr. Market is paying for Adobe and its peers:

P/E

Price-to-Free Cash Flow

Projected Growth Rate

Adobe

34

18

14%

Apple (NASDAQ:AAPL)

46

34

22%

Autodesk (NASDAQ:ADSK)

34

18

16%

Corel (NASDAQ:CREL)

n/a

8

10%

Google (NASDAQ:GOOG)

53

72

34%

Eastman Kodak (NYSE:EK)

13

negative

4%

Microsoft (NASDAQ:MSFT)

23

19

12%

Scanning the competitive landscape, it seems clear that Adobe and its peers are being accorded high valuations, at least from a P/E perspective. Valued on their cash flow, however, most everyone (save Google) looks more reasonably priced -- and Adobe is the third-cheapest of the bunch, following Corel and Autodesk. Personally, I don't think Adobe's price-to-free cash flow ratio, at 1.3 times its growth rate, is cheap enough to buy, but that's just my opinion. I could be wrong.

Foolish takeaway
Honestly, the only company I see here that tickles my value-investing fancy is Corel. That firm's lack of trailing profits as measured by GAAP may be scaring surface-level thinkers away from the stock, depressing its price. Meanwhile, the firm is expected to grow at a modest 10% pace. Granted, it's a small fish swimming in a big pond, circled by sharks. But the price here looks a whole lot more attractive than what Adobe's own shares are fetching. Buyout, anyone?

What is Wall Street thinking about Adobe these days? Find out in "This Just In: Upgrades and Downgrades."

And what did we think of the Q4 report? Anders Bylund gives you the lowdown in "A Solid Quarter From Adobe."

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Fool contributor Rich Smith does not own shares of any company named above. Microsoft is an Inside Value pick. The Motley Fool has a disclosure policy.