Amid a fluctuating market, Salesforce Inc (CRM, Financial) experienced a daily loss of 4.14%, contrasting with a 3-month gain of 4.78%. With an Earnings Per Share (EPS) of 4.2, investors are contemplating whether Salesforce (CRM) is modestly overvalued. This article delves into the valuation analysis of Salesforce, guiding investors through its financial landscape to determine the stock's true worth.
Company Introduction
Salesforce Inc provides a suite of enterprise cloud computing solutions, focusing on customer relationship management. The company's comprehensive Customer 360 platform is integral in connecting customer data across various systems, apps, and devices, which is pivotal for sales, service, marketing, and commerce activities. With a current stock price of $282.14 and a GF Value of $247.04, Salesforce (CRM, Financial) presents a case for detailed valuation analysis.
Summarize GF Value
The GF Value is a proprietary metric, providing an estimation of a stock's intrinsic value. Salesforce (CRM, Financial)'s fair value is assessed considering historical trading multiples, a GuruFocus adjustment factor based on the company's past performance, and future business performance projections. As the market cap hovers around $273.70 billion, Salesforce (CRM) is positioned as modestly overvalued, suggesting potential lower long-term returns compared to the company's business growth.
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Financial Strength
Assessing a company's financial strength is crucial before investing. Salesforce's cash-to-debt ratio stands at 1.13, placing it in a less favorable position than 62.76% of its peers in the Software industry. Nevertheless, with a financial strength rating of 7 out of 10, Salesforce's financial stability is considered fair.
Profitability and Growth
Investing in companies with a consistent track record of profitability is generally less risky. Salesforce has maintained profitability for 8 out of the past 10 years. With a robust operating margin of 17.21%, Salesforce outperforms 86% of the companies in the Software industry, reflecting strong profitability. The company's growth also impresses, with a 3-year average revenue growth rate surpassing 66.18% of its industry counterparts.
ROIC vs WACC
Comparing Return on Invested Capital (ROIC) with Weighted Average Cost of Capital (WACC) provides insight into Salesforce's value creation. With an ROIC of 5.67 and a WACC of 12.47 over the past 12 months, the analysis suggests that Salesforce may be challenged in generating value exceeding its capital costs.
Conclusion
In summary, Salesforce (CRM, Financial) appears to be modestly overvalued. Despite this, the company's financial condition is fair, and its profitability and growth are commendable. For a deeper understanding of Salesforce's financials, one can explore their 30-Year Financials here.
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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.
