’s Stock Over IBM?

CRM: Salesforce logo

We think that’s stock (NYSE: CRM) currently is a better pick compared to IBM’s stock (NYSE: IBM).’s stock trades at about 11.6x trailing revenues, compared to around 1.7x for IBM. Does this gap in the companies’ valuations make sense? We believe so. has seen better revenue growth over the last three years while IBM’s revenues have fallen. With respect to operating margins both companies saw a fall over the last three years with seeing a smaller fall. However, there is more to the comparison, which makes a better bet than IBM at these valuations. Let’s step back to look at the fuller picture of the relative valuation of the two companies by looking at historical revenue growth as well as operating income and operating margin growth. Our dashboard vs International Business Machines: Industry Peers; Which Stock Is A Better Bet? has more details on this. Parts of the analysis are summarized below.

1. Clear Winner On Revenue Growth

With’s fiscal year ending in January, its ongoing FY is 2022 while IBM’s is 2021. If compared on the basis of the past three years, trumps IBM in revenue growth.’s revenue was recorded at $23.5 billion in the last twelve months period compared to $13.3 billion in FY 2019 (a jump of 76%). On a comparable basis, IBM’s revenue was recorded at $73.8 billion in the last twelve months period compared to $79.6 billion in FY 2018 (a fall of 7%). Further, for the most recent quarter (Q2’22 for and Q2’21 for IBM),’s revenues jumped 23% YoY, while IBM’s grew by 0.9%.

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Due to the faster revenue growth of it holds an advantage over IBM which has seen a revenue decline in recent years. This makes’s revenue growth impressive and hence makes it a better bet.

2. Edges out On Margins’s operating margin was 4.4% in the last twelve month period compared to 9.3% for IBM but over the last three years operating margin for has fallen by 1.5% compared to a 7.1% fall by IBM. While the dent in’s margins has been offset by the revenue growth, IBM on the other hand, has seen a fall in revenues and margins.

Risk has a better debt position, with debt as % of equity of 4.2% vs 45.4% for IBM. has more cash cushion, with cash as % of assets of 10.9% vs 8.9% for IBM.

The Net of It All

While’s trailing revenue multiple stands higher than that of IBM, it has seen stellar growth in revenues over the last three years and a lower fall in operating margins compared to IBM in the same period. Looking at the post-Covid recovery, overall has fared better than IBM. Over the last twelve months revenue growth was at 21% while IBM’s revenue fell by 3.6%. Hence we believe has the potential to keep riding ahead, supported by strong financials and the gap in valuation could further widen over time. As such, we believe that is currently a better buying opportunity compared to IBM stock.

While CRM stock is likely to move higher in the near term, there are several peers in its sector that look like a Better Bet Than CRM Stock. Also, Peer Comparisons summarizes how the company fares against peers on metrics that matter.


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