Salesforce Stock: Join the Rally at a 35% Discount

Salesforce (CRM) stock might be a good buy now. Why? Because you get high margins – reflective of pricing power and cash generation capacity – for a discounted price. Companies like this generate consistent, predictable profits and cash flows, which reduce risk and allow capital to be reinvested. The market tends to reward that.

What Is Happening With CRM

CRM may be down -30% so far this year, but the silver lining is that it is now 35% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago.

The stock may not reflect it yet, but here is what’s going well for the company. Salesforce’s latest AI offerings, particularly Agentforce and the Data Cloud, are driving significant customer adoption and larger deals. Agentforce gained over 3,000 paying customers quickly, and over 90% of large Q4 FY25 deals included AI components. This focus on high-value AI solutions, alongside a remaining performance obligation of $63.4 billion, underscores future cash generation, even as the pace of revenue expansion has moderated. Salesforce reported $13.1 billion in operating cash flow for FY25.

CRM Has Strong Fundamentals

• Recent Profitability: Nearly 33.3% operating cash flow margin and 21.2% operating margin LTM.
• Long-Term Profitability: About 30.6% operating cash flow margin and 17.8% operating margin last 3-year average.
• Revenue Growth: Salesforce saw growth of 8.3% LTM and 10.5% last 3-year average, but this is not a growth story
• Available At Discount: At P/S multiple of 5.7, CRM stock is available at a 35% discount vs 1 year ago.

Below is a quick comparison of CRM fundamentals with S&P medians.

*LTM: Last Twelve Months

Don’t Expect A Slam Dunk, Though

While CRM stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. Salesforce (CRM) took some pretty big hits during market turmoil. It fell about 70% in the Global Financial Crisis and dropped nearly 59% in the inflation shock. Even during less severe sell-offs, like the 2018 correction and the Covid pandemic, it still declined over 24% and 35% respectively. The stock’s strong fundamentals don’t make it immune when volatility spikes—drawdowns like these show that risk is very real, even for well-regarded companies. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read CRM Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

If you want more details, read Buy or Sell CRM Stock.

How We Arrived At CRM Stock

CRM piqued our interest because it meets the following criteria:

1. Greater than $10 Bil in market cap
2. High CFO (cash flow from operations) margins or operating margins
3. Meaningfully declined in valuation over the past 1 year

But if CRM doesn’t look good enough to you, here are other stocks that also check all these boxes:

1. Visa (V)
2. ServiceNow (NOW)
3. Texas Instruments (TXN)

Notably, a portfolio that was built starting 12/31/2016 with stocks that fulfil the criteria above would have performed as follows:

• Average 12-month forward returns of nearly 19%
• 12-month win rate (percentage of picks returning positive) of about 72%

Multi Asset Portfolios Offer More Upside With Less Risk

Individual picks are volatile but diversified assets offset each other. A multi asset portfolio helps you stay the course capture upside and reduce downside.

The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices