What You May Have Missed About Salesforce (CRM)

It hasn't been a great afternoon session for Salesforce investors, who have watched their shares sink by -2.0% to a price of $209.33. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.

A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:

Salesforce, Inc. provides Customer Relationship Management (CRM) technology that brings companies and customers together worldwide. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 27.16 and an average price to book (P/B) ratio of 6.23. In contrast, Salesforce has a trailing 12 month P/E ratio of 550.9 and a P/B ratio of 3.57.

Salesforce's PEG ratio is 1.36, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Growing Revenues With Increasing Reinvestment in the Business:

2020-01-31 2021-01-31 2022-01-31 2023-01-31
Revenue (MM) $17,098 $21,252 $26,492 $31,352
Gross Margins 75.2% 74.4% 73.5% 73.3%
Operating Margins 2.7% 2.1% 2.1% 5.9%
Net Margins 0.74% 19.16% 5.45% 0.66%
Net Income (MM) $126 $4,072 $1,444 $208
Depreciation & Amort. (MM) -$2,135 -$2,846 -$3,298 -$3,786
Earnings Per Share $0.15 $4.38 $1.48 $0.38
EPS Growth n/a 2820.0% -66.21% -74.32%
Diluted Shares (MM) 850 930 974 974
Free Cash Flow (MM) $3,688 $4,091 $5,283 $6,313
Capital Expenditures (MM) -$643 -$710 -$717 -$798
Net Current Assets (MM) -$5,278 -$2,919 -$14,228 -$14,095
Current Ratio 1.08 1.23 1.05 1.02
Long Term Debt (MM) $2,673 $2,673 $10,592 $9,419
Net Debt / EBITDA -0.31 -2.44 2.21 0.62

Salesforce has growing revenues and increasing reinvestment in the business and exceptional EPS growth. Additionally, the company's financial statements display a pattern of improving cash flows and low leverage. However, the firm suffers from slimmer gross margins than its peers and weak operating margins with a positive growth rate.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.