Is the Market Overlooking Salesforce Stock’s Next Move?

We think Salesforce (CRM) stock could be a good value buy. It is currently trading lower than average valuation, and has reasonable revenue growth and strong margins to go with its modest valuation.

Buying stocks with low valuations or trading well below their peaks but maintaining strong margins allows investors to capture mean reversion and valuation re-rating potential. The downside risk is potentially less because high-margin businesses can sustain earnings and recover faster when sentiment or market conditions improve

What Is Happening With CRM

CRM stock is now 44% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago, and also trades at a P/E (Price-to-Earnings) ratio that is below S&P 500 median.

The stock may not reflect it yet, but here is what’s going well for the company. Salesforce’s strong Q3 FY26 margins stem from disciplined operations and a product mix favoring higher-value platform contracts. Revenue growth is supported by a robust $59.5 billion remaining performance obligation and accelerating adoption of AI-powered Agentforce and Data Cloud offerings, with their combined annual recurring revenue up over 114%. Valuation is discounted due to market caution around AI’s evolving impact and competitive dynamics, despite strong customer commitments.

CRM Has Strong Fundamentals

• Reasonable Revenue Growth: 8.4% LTM and 10.0% last 3 year average.
• Strong Margin: Nearly 19.2% 3-year average operating margin.
• No Major Margin Shock: Salesforce has avoided any large margin collapse in the last 12 months.
• Modest Valuation: Despite encouraging fundamentals, CRM stock trades at a PE multiple of 24.3

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

*LTM: Last Twelve Months

But What Is The Risk Involved?

While CRM stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. Salesforce’s stock, CRM, hasn’t been immune to market turmoil. It slid about 70% in the Global Financial Crisis and dropped nearly 59% during the inflation shock. Even in less severe sell-offs like the 2018 correction and Covid pandemic, it still fell around 25% to 36%. The company’s solid fundamentals matter, but when the market turns volatile, big drawdowns happen regardless. 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.

For more details and our view, see Buy or Sell CRM Stock.

Stocks Like CRM

Not ready to act on CRM? Consider these alternatives:

1. Accenture (ACN)
2. Automatic Data Processing (ADP)
3. Humana (HUM)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Meaningfully below 1Y high
3. Current P/S < last few year average
4. Strong operating margin
5. P/E ratio below S&P 500 median

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 12.7% and 25.8% respectively
• Win rate (percentage of picks returning positive) of > 70% for both 6-month and 12-month periods
• Strategy consistent across market cycles

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