CRM Stock Study (11-6-25)

Posted by Mark on February 28, 2025 at 07:47 | Last modified: November 6, 2025 12:19

I recently did a stock study on Salesforce Inc. (CRM, $252.68).

M* writes:

     > Salesforce provides enterprise cloud computing solutions. The
     > company offers customer relationship management technology
     > that brings companies and customers together. Its Customer
     > 360 platform helps the group deliver a single source of
     > truth, connecting customer data across systems, apps, and
     > devices to help companies sell, service, market, and conduct
     > commerce. It also offers Service Cloud for customer support,
     > Marketing Cloud for digital marketing campaigns, Commerce
     > Cloud as an e-commerce engine, the Salesforce Platform,
     > which allows enterprises to build applications, and other
     > solutions, such as MuleSoft for data integration.

Since 2017, the large-size company has grown sales and earnings at annualized rates of 21.7% and 41.6%, respectively (references to year from Value Line and BI website incremented by one to align with FY ending Jan 31). Lines are mostly up, jagged (EPS), and parallel with sizeable EPS declines in ’17, ’19, ’21, and ’22 [I rejected the stock three years ago based on visual inspection]. Five- (10-) year EPS R^2 is 0.04 (0.39) and Value Line (VL) gives an Earnings Predictability score of 30.

Since 2017, PTPM trails peer averages but leads the industry while increasing from 0.3% to 19.6% (’25) with a last-5-year mean of 10.8%. ROE lags peer and industry averages despite increasing from 2.7% to 10.5% (’25) with a last-5-year mean of 6.1%. Debt-to-Capital is lower than peer and industry averages while falling from 26.5% to 15.7% (’25) with a last-5-year mean of 17.0%.

Quick Ratio is 0.9 per M* who assigns “Wide” Economic Moat, gives “Standard” rating for Capital Allocation, and a B grade for Financial Health (per BI website). VL gives an A grade for Financial Strength and reports Interest Coverage over 25.

With regard to sales growth:

• YF projects YOY 8.9% and 9.1% for ’26 and ’27, respectively (based on 52 analysts).
• Zacks projects YOY 10.8% and 8.8% for ’26 and ’27, respectively (16 analysts).
• VL projects 7.2% annualized growth from ’25-’29.
• CFRA projects 8.8% and 8.9% per year for ’25-’27 and ’25-’28, respectively.
• M* provides a 2-year ACE of 9.0% and projects 5-year annualized growth of 8.0% in its analyst note.

My 7.0% per year forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 12.7% and 13.3% per year for ’25-’27 and ’25-’28, respectively (based on 55 analysts).
• Nasdaq.com projects 12.4% YOY and 12.0% per year for ’27 and ’26-’28 (18 /17 / 5 analysts for ’26 / ’27 / ’28).
• Seeking Alpha projects 4-year annualized growth of 17.1%.
• Argus projects 5-year annualized growth of 13.0%.
• Finviz gives ACE 5-year annualized growth of 12.6% (19).
• LSEG estimates LTG at 13.5%.
• YF projects YOY 11.3% and 11.9% for ’26 and ’27, respectively (54).
• Zacks projects YOY 11.4% and 11.3% for ’26 and ’27 (18) along with 5-year annualized growth of 13.9%.
• VL projects annualized growth of 15.1% from ’25-’29.
• CFRA projects 11.1% and 11.5% per year for ’25-’27 and ’25-’28, respectively, along with 3-year CAGR of 11.0%.
• M* projects long-term annualized growth of 16.7%.

My 12.0% per year forecast is below the long-term estimate range [mean of seven: 14.6%]. Initial value is ’25 EPS of $6.36/share (up 51.4% YOY) rather than 2026 Q2 $6.88 (annualized).

My Forecast High P/E is 35.0. Since 2016, high P/E ranges from 58.0 in ’25 to 1243 in ’20 with triple digits four times and quadruple digits two. I consider all these NMF and am forecasting below the range (and current P/E of 36.7).

My Forecast Low P/E is 26.0. Since 2016, low P/E ranges from 26.3 in ’21 to 919 in ’20 with triple digits five times. Again, I consider these NMF and am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $165.40 is default based on initial value given above. That is 34.5% less than the previous closing price and 27.0% less than the 52-week low.

Dividends are new in 2025 with Payout Ratio (PR) of 25.2%. I am forecasting on the conservative side at 20.0%.

These inputs land CRM in the HOLD zone with a U/D ratio of 1.6. Total Annualized Return (TAR) is 9.8%.

PAR (using Forecast Average—not High—P/E) of 6.9% is less than I seek in a large-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 138 studies done in the past 90 days (my study along with 53 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 8.0%, 12.2%, 45.0, 30.9, and 25.2%. I am lower across the board. VL has no future average annual P/E available, which echoes my NMF discussion above.

MS high / low EPS are $12.02 / $6.76 versus my $11.21 / $6.36 (per share). My high EPS is less due to a lower growth rate and initial value. VL just undercuts me at $11.15.

MS LSPF of $200.00 implies a Forecast Low P/E of 29.6 versus the above-stated 30.9. MS LSPF is 4.3% less than the default $6.76/share * 30.9 = $208.88 resulting in more conservative zoning. MS LSPF is 20.9% greater than mine, however.

MOS is robust in this study because my inputs are near or below historical/analyst/MS averages/ranges. Consistent with this is MS TAR (17.0%) exceeding mine by 7.2% per year. My LSPF is also much more conservative.

With regard to valuation, PEG is 1.6 and 2.7 per Zacks and my projected P/E: slightly overvalued (1.7 per M*). Relative Value [(current P/E) / 5-year-mean average P/E] is cheap at 0.76 with all 3- and 4-digit P/Es excluded (would otherwise appear much cheaper).

Per U/D, CRM is a BUY under $221/share. BI TAR criterion is met [392.4 / ((14.27 / 100 ) +1 ) ^ 5] ~ $201 with a forecast high price ~$392.

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