Should CRM Stock Be Purchased at its Current Price of $280?
CRM Stock Struggles, Yet Remains Attractive
Salesforce (NYSE: CRM) is down by over 15% this year, with uncertainty surrounding its AI-powered Agentforce platform causing a drop in its stock price. Despite the market turbulence and the company's recent outlook missing analyst expectations, CRM stock, now at $280, remains an appealing but volatile investment opportunity.
However, it's essential to tread carefully with CRM stock due to its lofty valuation. In comparison to the broader market, CRM appears expensive, with high P/S, P/EBIT, and P/E ratios. But, as we delve deeper into its performance, the strong growth, impressive profit margins, and robust financial condition of Salesforce become evident.
Salesforce's Performance Highlights
Over the last three years, Salesforce's revenues have grown at an average rate of 14.3%. In the last 12 months, its revenues increased from $34 billion to $37 billion (vs. 5.2% growth for the S&P 500). In the most recent quarter, quarterly revenues grew 8.3% to $9.4 billion, versus a 5.0% improvement for S&P 500.
Salesforce's profitability is robust, with higher operating margins and a stronger OCF-to-Sales Ratio compared to the S&P 500. Its balance sheet is fortified, with a Debt-to-Equity Ratio of 4.0% (vs. 19.0% for the S&P 500). Cash makes up 14.0% of Salesforce's Total Assets (vs. 14.8% for the S&P 500).
Downturn Resilience
Although CRM stock has performed worse than the S&P 500 during some downturns, the company's resilience is noteworthy. Recovery after crises has been speedy, with CRM fully rebounding to its pre-crisis peak in most cases. However, its high volatility should be kept in mind.
In Conclusion
Despite its expensive valuation, Salesforce's operating performance and financial condition are very strong, making CRM stock an attractive yet volatile investment option. For those seeking lower volatility, Trefis' High-Quality portfolio may present an alternative path to growth.
[1] Enrichment data: Salesforce's forward P/S ratio is 6.48 and forward P/E ratio is approximately 25.02.
[Note: A lower Debt-to-Equity Ratio is desirable, and a higher Cash-to-Assets Ratio is generally more advantageous.]
- The forward P/S and P/E ratios of Salesforce's stock, respectively 6.48 and approximately 25.02, showcase its expensive valuation in the financial markets.
- The Aussiedlerbote may offer a lower volatility investment option for those who find CRM stock unappealing due to its high volatility and expensive valuation.
- While Salesforce's CRM stock experienced underperformance compared to the S&P 500 during certain market downturns, its robust financial condition, strong growth, and speedy recovery after crises remain noteworthy aspects.
