Why Salesforce Stock Is Rated a "Hold" Today
Salesforce (NYSE: CRM) is a $64 billion company today. Investors that bought shares one year ago are sitting on a 17.33% total return. That's below the S&P 500's return of 18.3%.
Salesforce stock is underperforming the market. It's beaten down, but it reports earnings on Thursday. So is it a good time to buy? To answer this question we've turned to the Investment U Stock Grader. Our research team built this system to diagnose the financial health of a company.
Our system looks at six key metrics...
Earnings-per-Share (EPS) Growth: Salesforce reported a recent EPS growth rate of -75%. That's below the software industry average of 12.28%. That's not a good sign. We like to see companies that have higher earnings growth.
Price-to-Earnings (P/E): The average price-to-earnings ratio of the software industry is 69.82. And Salesforce's ratio comes in at 342.46. Its valuation looks expensive compared to many of its competitors.
Debt-to-Equity : The debt-to-equity ratio for Salesforce stock is 26.78. That's below the software industry average of 59.65. The company is less leveraged.
Free Cash Flow per Share Growth : Salesforce's FCF has been higher than its competitors over the last year. That's good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It's one of our most important fundamental factors.
Profit Margins : The profit margin of Salesforce comes in at -2.24% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Salesforce's profit margin is above the software average of -22.86%. So that's a positive indicator for investors.
Return on Equity : Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Salesforce is 2.87%, and that's below its industry average ROE of 11.1%.
Salesforce stock passes three of our six key metrics today. That's why our Investment U Stock Grader rates it as a hold.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That's why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth. For more details, click here.
Thoughts on this article? Leave a comment below.