Salesforce.com, Inc. (NYSE:CRM) is a leading provider of cloud-based computing solutions, focused on customer relationship management (CRM) for companies in the United States and internationally. Some of its unique offering include Sales Cloud, Service Cloud, Marketing Cloud, Commerce Cloud, and the Customer 360 Platform. The company was founded in 1999 and went public in June of 2004. This writer is bullish on CRM stock.
Salesforce recently completed its acquisition of Slack (former ticker: WORK), which helps to make its ecosystem more comprehensive and indispensable for companies. The purchase will also assist Salesforce.com in reaching its stated goal of $50 billion in revenue by Fiscal 2026.
(See Salesforce.com, Inc. stock charts on TipRanks)
Historical Outperformance
An investment in Salesforce of $10,000 at its IPO would have returned to the investor more than $598,000 today, as compared to just over $55,000 for the S&P 500 ETF Trust (SPY) over that time.
Over the last year, however, CRM stock has returned just 3.25% to investors, underperforming the broader market. This has allowed the stock's fundamentals to catch up to its price and offers an opportunity for investors. The coalescence of the price action allows investors to purchase or add before the next move higher, which should come as the company continues to execute its vision.
Growth, Profitability, and Cash Flow
Salesforce has grown revenue at a compound annual growth rate (CAGR) of over 20% for the last five years, for a total revenue gain of 150% over that time. Note that Salesforce has a January 31st fiscal year end. As shown below, the company has also steadily grown EBITDA, generating over $3.5 billion for shareholders over the last 12 months.
Chart was created by author, with data from the company's SEC filings.
The company is well on its way to the $50 billion goal mentioned previously, however there is much room left for more explosive growth.
The company's cash flow has also grown impressively over the years. The company's cash from operations has more than doubled in the last five years: from $2.16 billion for the year ended January 31, 2017 to $4.8 billion in the year ended January 31, 2021.
The price to sales ratio of 10x is in the historical trading range. This could be an opportunity to buy as the company continues to increase revenue, EBITDA, and cash flows.
Salesforce is deserving of higher valuation metrics because it is incredibly profitable. CRM has a gross profit margin near 75% and EBITDA margin near 15%, both as of the trailing twelve months. The profitability should only increase as the company continues to scale and successfully integrates Slack into the fold.
Analysts Rate Strong Buy
Analysts like what they see with CRM stock. Of the 36 ratings, 29 rate it a Buy, with seven Hold ratings and no Sell ratings, according to TipRanks. The average Salesforce.com price target is $303.32. This implies 19.2% upside from the stock’s September 14, 2021 closing price of $254.37.
Summary on Salesforce.com
Salesforce is a leader in the customer relationship management business. With the acquisition of Slack, it is now even more indispensable than ever to those who rely on it.
CRM is highly profitable, growing, and has aggressive yet obtainable goals. The ability of the companies that Salesforce serves to manage, analyze, and act on data is pivotal to their success. That, in turn, makes Salesforce pivotal to their success. This will be the reason the company will once again outperform the broader market in the years to come.
Disclosure: At the time of publication, Bradley Guichard had a net long position in CRM stock mentioned in this article.
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