Should you buy Salesforce stock?
- 5 months ago
Salesforce stock analysis. CRM stock.
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The company’s market cap is around $183 billion, and once we adjust for the cash of $7 billion and long-term debt of $9,4 billion, the enterprise value is roughly $185 billion. This puts quite a high multiple if we compare this to the operating profit mentioned above.
The growth ahead is expected to be above 10%, which is still impressive, but the company is likely to focus more on expanding the margin by cutting the marketing & sales as the large expenses will be less and less justified as the company grows larger.
If we take a look at other companies that are selling software, such as Adobe, Autodesk, and Oracle, we can expect operating margins between 20% and 30%, which is a significant increase from the current levels.
Historically, the majority of the cash flow has been used to acquire new companies that could broaden the offering and add value. However, recently the company started returning part of the excess cash to the shareholders via share buybacks, which indicates that the management believes the company is undervalued. Whether that is the case or not, depends on the company’s ability to improve the margins in the coming years.
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Visit our Substack for more: https://www.overlookedalpha.com
The company’s market cap is around $183 billion, and once we adjust for the cash of $7 billion and long-term debt of $9,4 billion, the enterprise value is roughly $185 billion. This puts quite a high multiple if we compare this to the operating profit mentioned above.
The growth ahead is expected to be above 10%, which is still impressive, but the company is likely to focus more on expanding the margin by cutting the marketing & sales as the large expenses will be less and less justified as the company grows larger.
If we take a look at other companies that are selling software, such as Adobe, Autodesk, and Oracle, we can expect operating margins between 20% and 30%, which is a significant increase from the current levels.
Historically, the majority of the cash flow has been used to acquire new companies that could broaden the offering and add value. However, recently the company started returning part of the excess cash to the shareholders via share buybacks, which indicates that the management believes the company is undervalued. Whether that is the case or not, depends on the company’s ability to improve the margins in the coming years.
#stocks #investing #overlookedalpha #stockstowatch