SALESFORCE INC (NYSE:CRM) stands out as a compelling candidate for quality investors, meeting key criteria for long-term growth, profitability, and financial health. The company’s strong fundamentals and consistent performance make it a noteworthy pick in the software industry. Below, we examine why CRM aligns with the principles of quality investing.
Key Strengths of SALESFORCE INC
Revenue and EBIT Growth: CRM has demonstrated solid revenue growth, with a 5-year CAGR of 9.62%. More importantly, EBIT growth over the same period surged at 75.31%, indicating improving operational efficiency and profitability.
High ROIC: The company’s Return on Invested Capital (excluding cash and goodwill) is an impressive 390.16%, reflecting exceptional capital allocation and operational effectiveness.
Strong Profit Quality: With a 5-year average Profit Quality (Free Cash Flow to Net Income) of 786.34%, CRM converts a significant portion of earnings into cash, a hallmark of financial stability.
Low Debt Burden: The Debt-to-Free Cash Flow ratio stands at a healthy 0.67, meaning CRM could theoretically repay its debt in less than a year using its current cash flow.
Valuation: While CRM trades at a P/E of 25.52, it remains cheaper than 75% of its industry peers, suggesting reasonable valuation relative to growth prospects.
Fundamental Analysis Summary
Our fundamental report assigns CRM a score of 7 out of 10, highlighting strengths in profitability and financial health. Key takeaways include:
Profitability: High operating margins (20.50%) and improving profit margins (16.08%) place CRM ahead of most competitors.
Financial Health: A low debt-to-equity ratio (0.14) and strong Altman-Z score (4.91) indicate a stable balance sheet.
Growth Outlook: Analysts expect revenue to grow at 9.62% annually over the next three years, supporting continued expansion.
For investors seeking high-quality companies with durable competitive advantages, CRM presents a strong case.
This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own analysis before making investment decisions.