Stock Analysis

Is Now An Opportune Moment To Examine salesforce.com, inc. (NYSE:CRM)?

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NYSE:CRM
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Today we're going to take a look at the well-established salesforce.com, inc. (NYSE:CRM). The company's stock received a lot of attention from a substantial price increase on the NYSE over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at salesforce.com’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for salesforce.com

What's the opportunity in salesforce.com?

According to my valuation model, salesforce.com seems to be fairly priced at around 2.97% above my intrinsic value, which means if you buy salesforce.com today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $294.22, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because salesforce.com’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will salesforce.com generate?

earnings-and-revenue-growth
NYSE:CRM Earnings and Revenue Growth November 3rd 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of salesforce.com, it is expected to deliver a relatively unexciting earnings growth of 1.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? CRM’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on CRM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that salesforce.com has 3 warning signs and it would be unwise to ignore these.

If you are no longer interested in salesforce.com, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

What are the risks and opportunities for Salesforce?

Salesforce, Inc. provides customer relationship management technology that brings companies and customers together worldwide.

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Rewards

  • Trading at 39.5% below our estimate of its fair value

  • Earnings are forecast to grow 47.06% per year

Risks

  • Profit margins (0.9%) are lower than last year (7%)

  • Large one-off items impacting financial results

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