Cash Machine Trading Cheap – Salesforce Stock Set to Run?
We think Salesforce (CRM) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market.
The stock is available at a significant discount to its 3-month, 1-year, and 2-year highs.
CRM Has Strong Fundamentals
- Cash Yield: Salesforce offers an impressive cash flow yield of 9.0%.
- Growing: Revenue growth of 9.6% over the last twelve months means that the cash pile is going to grow.
- Valuation Discount: CRM stock is currently trading at 34% below its 3-month high, 41% below its 1-year high, and 53% below its 2-year high.
Below is a quick comparison of CRM fundamentals with S&P medians.
| CRM | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Application Software | – |
| Free Cash Flow Yield | 9.0% | 4.3% |
| Revenue Growth LTM | 9.6% | 6.8% |
| Operating Margin LTM | 21.5% | 18.6% |
| PS Ratio | 3.8 | 3.3 |
| PE Ratio | 21.4 | 24.4 |
| Discount vs 3-Month High | -34.1% | -9.2% |
| Discount vs 1-Year High | -40.9% | -11.9% |
| Discount vs 2-Year High | -53.1% | -13.8% |
*LTM: Last Twelve Months
But What About 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 took a hit of about 70% during the Global Financial Crisis, 59% in the inflation shock, and 36% in the Covid pandemic. The 2018 correction wasn’t kind either, with the stock dropping nearly 25%. No matter how strong the company looks on paper, these dips show that even solid stocks can take big hits when the market turns. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read CRM Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
If you want to see more details, read Buy or Sell CRM Stock.
Other Stocks Like CRM
Not ready to act on CRM? You could consider these alternatives:
These stocks have positive revenue growth, high free cash flow yield, and are trading at a meaningful discount to 3M, 1Y, and 2Y highs.
A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have resulted in average 6-month and 12-month forward returns of 25.7% and 57.9% respectively, with win rate (percentage of picks returning positive) of above 70%.
Portfolios Beat Stock Picking
Individual stocks are unpredictable. A smart portfolio helps you invest, limits downside shocks, and provides upside exposure.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, 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. Why is that? HQ Portfolio has posted more than 105% in cumulative return since inception, with less risk versus the benchmark index, as evident in HQ Portfolio performance metrics.