Despite a recent daily loss of 2.72% and a three-month decline of 7.41%, Salesforce Inc (CRM, Financial) continues to be a significant player in the tech sector with an Earnings Per Share (EPS) of 4.2. This analysis seeks to determine if Salesforce (CRM) is currently fairly valued at its recent price of $270.98, compared to the GF Value of $249.44.
Company Overview
Salesforce Inc provides comprehensive cloud computing solutions, primarily focusing on customer relationship management (CRM, Financial). The company's flagship Customer 360 platform integrates customer data across various systems, enhancing sales, customer service, and marketing efforts. Salesforce also supports digital commerce and application development among other services. As of now, Salesforce's market capitalization stands at $263.20 billion, reflecting its significant presence in the software industry.
Understanding GF Value
The GF Value is a unique measure calculated to represent the intrinsic value of a stock. This figure is derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and projected future business performance. According to this metric, Salesforce (CRM, Financial) is currently fairly valued, suggesting that its stock price should align closely with its business growth over the long term.
Financial Strength and Stability
Investing in companies with solid financial health is crucial to minimizing the risk of capital loss. Salesforce's cash-to-debt ratio stands at 1.13, which, although lower than many of its peers, still supports a GuruFocus financial strength rating of 7 out of 10. This indicates that Salesforce maintains a fair level of financial stability.
Profitability and Growth Prospects
Salesforce has demonstrated strong profitability, with an operating margin of 17.21%, ranking it higher than 85.27% of its industry peers. The company's consistent revenue growth, with a 3-year average annual revenue increase of 15.7%, underscores its capacity to expand effectively. Furthermore, Salesforce's EBITDA growth rate of 41.8% significantly outpaces many competitors, highlighting its efficiency in generating earnings before interest, taxes, depreciation, and amortization.
Return on Invested Capital vs. Weighted Average Cost of Capital
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) provides insights into its profitability relative to the capital cost. Salesforce's ROIC stands at 5.67, while its WACC is higher at 12.51, suggesting challenges in creating value above its capital cost in the past year.
Conclusion
Overall, Salesforce (CRM, Financial) appears to be fairly valued considering its current market position, financial strength, and growth prospects. For investors, this suggests a potential alignment with the company's long-term business growth. To explore more about Salesforce's financials or to consider other high-quality investment opportunities, visit Salesforce's 30-Year Financials or the GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
