Required knowledge for Salesforce (CRM) Investors

Salesforce shares fell by -2.7% during the day's evening session, and are now trading at a price of $205.86. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.

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 556.4 and a P/B ratio of 3.5.

Salesforce's PEG ratio is 1.37, 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:

2020-03-05 2021-03-17 2022-03-11 2023-03-08
Revenue (MM) $17,098 $21,252 $26,492 $31,352
Gross Margins 75.2% 74.4% 73.5% 73.3%
Operating Margins 1.7% 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
Net Interest Expense (MM) n/a n/a n/a n/a
Depreciation & Amort. (MM) -$2,135 -$2,846 -$3,298 -$3,786
Earnings Per Share $0.15 $4.38 $1.44 $0.37
EPS Growth n/a 2820.0% -67.12% -74.31%
Diluted Shares (MM) 850 930 1,001 974
Free Cash Flow (MM) $4,974 $5,511 $6,717 $7,909
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
LT Debt to Equity 0.08 0.06 0.18 0.16

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 healthy debt levels. 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.