Today, Salesforce Inc (CRM, Financial) recorded a daily loss of -2.72%, a 3-month gain of 3.06%, and an Earnings Per Share (EPS) (EPS) of 0.38. As we delve into the financial intricacies of Salesforce (CRM), the question arises: is the stock significantly undervalued? This article presents an in-depth valuation analysis to answer this question. Keep reading to discover more about Salesforce's intrinsic value, financial strength, profitability, and growth prospects.
Company Overview
Salesforce Inc provides enterprise cloud computing solutions, offering customer relationship management technology that brings companies and customers together. Its Customer 360 platform delivers a single source of truth, connecting customer data across systems, apps, and devices to help companies sell, service, market, and conduct commerce. With a current price of $205.82 per share and a market cap of $200.50 billion, Salesforce's stock appears to be significantly undervalued according to our valuation analysis.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line gives an overview of the fair value that the stock should be traded at. If the stock price is significantly above or below the GF Value Line, it indicates that the stock is overvalued or undervalued, respectively.
According to our GF Value calculation, Salesforce (CRM, Financial) appears to be significantly undervalued. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength
Checking the financial strength of a company is crucial before investing in its stock. Companies with poor financial strength pose a higher risk of permanent loss. Salesforce's cash-to-debt ratio of 1.07 is worse than 65.99% of companies in the Software industry, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. Salesforce has been profitable 7 over the past 10 years, with a revenue of $32.20 billion and an EPS of $0.38 in the past twelve months. Its operating margin is 9.2%, ranking better than 70.21% of companies in the Software industry, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. Salesforce's 3-year average annual revenue growth rate is 16.1%, ranking better than 67.84% of companies in the Software industry. This indicates a strong growth performance.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) and the weighted cost of capital (WACC) provides another perspective on its profitability. Salesforce's ROIC is 1.26, and its WACC is 11.35, indicating a need for improvement in capital efficiency.
Conclusion
In conclusion, Salesforce (CRM, Financial) appears to be significantly undervalued. The company's financial condition is fair, and its profitability is fair. Its growth ranks better than 70.51% of companies in the Software industry. To learn more about Salesforce stock, you can check out its 30-Year Financials here.
To find out high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
