FA Alpha Daily

This CRM giant might not be as cheap as you thought

Salesforce, a cloud CRM leader synonymous with digital transformation, is facing a reality check. After a decade of strong returns, recent developments have raised doubts about Salesforce’s ability to continue its growth. Its recent stock price decline might seem like an attractive entry point, but a closer look is necessary. In today’s FA Alpha Daily, we explore Salesforce’s financials using Uniform Accounting to see if this is a buying opportunity or a sign of more fundamental concerns.

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Thursday Uniform accounting analysis
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The digital transformation sweeping enterprises worldwide has disrupted traditional business models and given rise to new categories of software. 

As companies race to adopt cloud technologies and optimize customer experiences, innovative software vendors have emerged promising to help organizations navigate this shift.

Salesforce (CRM) has been a pioneer in the customer relationship management (CRM) software industry since its founding in 1999. 

Under the visionary leadership of CEO Marc Benioff, the company grew from humble beginnings operating out of a small San Francisco apartment to becoming the global leader in CRM.

Salesforce is a cloud-based software company that provides CRM services to help companies manage customer data and interactions across sales, marketing, commerce, and other business functions. 

CRM allows organizations to gain a unified view of customers and streamline processes across departments.

Through organic growth and strategic acquisitions, Salesforce expanded its platform to offer a complete suite of customer success solutions. 

Beyond traditional CRM functions, its cloud-based services now encompass marketing automation, commerce, analytics, and more. 

This broadened portfolio positioned Salesforce at the forefront of digital transformation trends.

Salesforce has been improving its Uniform ROA over the past decade. The company’s ROA rose to 37% from 10% between 2018 and 2024.

However, maintaining momentum in such a dynamic industry presents ongoing challenges. After a decade of strong returns, recent developments have cast doubts on Salesforce’s ability to sustain its track record of growth and execution.

Just two weeks ago, the market was pricing Salesforce for continued ROA improvement. But the company’s recent Q1 2025 earnings changed that outlook, missing revenue estimates.

On May 30, 2024, Salesforce cut its sales forecast, causing its stock to plunge 20% in a single day.

Our Embedded Expectations Analysis (“EEA”) shows that the company is still priced to sustain its ROA with modest growth. Multiples are in the historical range with 10.1x Uniform P/B and 30.1x Uniform P/E. 

The stock decline may make it look like an opportunity, but once the numbers are cleared with Uniform Accounting, it does not look cheap. 

Be wary if you are considering investing.


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Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

The Uniform Accounting insights in today’s issue are the same ones that power some of our best stock picks and macro research, which can be found in our FA Alpha Daily newsletters.

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