Salesforce.com Inc (CRM)

Conclusion

Salesforce is a software company that sells customer relationship management products, including Agentforce, Slack, Data 360 and Informatica. At a price of 214.94 USD on 2026-11-09, its market capitalisation is 176.9 billion USD.

The verdict is undervalued. Today's multiples sit well below their own ten-year medians: the P/E is 18.3 against a median of 120.9, a premium of -84.9%, and EV/EBITDA is 12.4 against a median of 58.7, a premium of -79.0%. The discounted cash flow gives 314.93 USD per share at a discount rate of 11.04%. The fair value band runs from 385.60 to 578.41 USD with a midpoint of 482.01 USD, a margin of safety of 124.3% at the current price. The fair value from historical multiples is 649.08 USD. The reverse DCF implies growth of 6.04% a year, against revenue growth of 14.34% a year over five years.

What holds the case up is free cash flow conversion of 156.8% over the last twelve months, ROIC of 14.6% against a WACC of 9.66%, and interest coverage of 39.6. What could break it is the next-year EPS estimate, which is down 4.4%, a current ratio of 0.84, and stock-based compensation equal to 8.3% of revenue.

Financial health

Financial strength is green, held up by net debt to EBITDA of 1.8 and interest coverage of 39.6, and held back only by a current ratio of 0.84 and a quick ratio of 0.67. The debt to equity ratio is 1.09. The Altman Z-score is 2.58, in the grey zone; the Altman model was designed for manufacturers, so it is only a rough guide for a software company. Insolvency risk: low, about 0.14% by the estimate of the Ohlson model over one to two years. The current ratio is the one weak point, though the company's interest coverage shows it can service its debt comfortably.

Earnings quality

Earnings quality is green. Free cash flow conversion is 156.8% over the last twelve months and 246.5% on a five-year basis, and the accrual ratio is -7.0%, which means cash generation exceeds reported earnings. Free cash flow after stock-based compensation is 11.49 billion USD. The five-year share count compound growth is 0.55%, so shares have not been shrinking through buybacks. The Piotroski score is 7 out of 9, and the Beneish M-score is -2.67, a reading that is unlikely to indicate manipulation. The company beat earnings expectations in 7 of the last 8 quarters, with an average surprise of 23.0%. Estimates for the current year rose 18.6% over 90 days, while estimates for next year rose 3.2%, though next year's growth estimate is -4.4%.

Profitability

Profitability is green. The operating margin is 21.4% against a ten-year median of 5.5%, and the net margin is 22.0% against a median of 6.9%. The gross margin is 77.3% against a median of 74.2%. Margin stability is 0.85. ROIC is 14.6% against a WACC of 9.66%, with the given spread of 5.0% in favour of value creation. The five-year median ROIC is 8.1%. Return on equity is 25.2%, but the DuPont split shows that it rests on a net margin of 18.0%, an asset turnover of 0.37 and an equity multiplier of 1.90, so the return is mainly margin-driven rather than leverage-driven.

Growth

Growth is yellow. Revenue compound growth is 9.8% over three years, 14.3% over five years and 20.1% over ten years. Revenue has grown in all 10 of the last 10 years. Earnings per share compound at 12.2% over five years; the three-year figure of 234.4% reflects a much smaller earlier base and should not be read as a run rate. Free cash flow per share compounds at 33.5% over three years and 27.9% over five years. The yellow colour comes from the next-year EPS estimate, which points to a decline of 4.4%.

Valuation

Valuation is green. The P/E of 18.3, EV/EBITDA of 12.4, price to free cash flow of 11.7 and price to sales of 4.0 all sit well below their ten-year medians, with premiums of -84.9%, -79.0%, -66.9% and -49.5%. Price to book is 4.6 against a median of 4.7, a premium of -2.2%. The discounted cash flow gives 314.93 USD per share, using a discount rate of 11.04%. The reverse DCF implies growth of 6.04%, a figure that sits -8.3% below five-year revenue growth and -21.9% below five-year free cash flow per share growth. The fair value band from 385.60 to 578.41 USD is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The dividend yield is 0.86% with a payout of 10% of free cash flow.

Risks

The weakest number is the next-year EPS estimate, down 4.4%; if that decline persists, the growth case weakens and the reverse DCF's implied 6.04% growth becomes harder to justify relative to the delivered growth. A current ratio of 0.84 means short-term obligations exceed liquid assets, so a slowdown in cash generation would tighten the balance sheet. Stock-based compensation at 8.3% of revenue dilutes shareholders' claims on cash flow, though the free cash flow after it remains positive. The Altman Z-score of 2.58 is in the grey zone and was built for manufacturers. This analysis does not include a debt maturity schedule or revenue by segment, so the timing of debt repayments and the mix of growth across products cannot be assessed.