How High Can salesforce.com Fly?

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Shares of salesforce.com (NYS: CRM) hit a 52-week high today. Let's look at how it got here and see whether clear skies are ahead.

How it got here
Salesforce is a quintessential cloud-computing stock, plain and simple -- one you need to know about. Its software-as-a-service, or SaaS, model has helped it deliver market-thumping returns for years, to the glee of Rule Breakers subscribers who may have been fortunate enough to buy it when it was originally recommended in February 2009 near $27.

It recently delivered a strong fourth-quarter earnings release, with revenue jumping by 38% and full-year 2013 revenue guidance seeing a boost to a range of $2.92 billion to $2.95 billion. The company has been making strides by adding a social twist to its enterprise software offerings.


Salesforce's cloud-driven rally shows no sign of stopping as the mobile revolution continues to accelerate.

How it stacks up
Let's see how Salesforce stacks up with some of its enterprise software peers.

CRM Chart

CRM data by YCharts

Let's add in some more fundamental metrics for additional insight.

Company

P/S (TTM)

Sales Growth (5-Year Rate)

Net Margin (TTM)

ROE (TTM)

salesforce.com9.635.5%(0.5%)(0.8%)
Oracle (NAS: ORCL) 3.919.9%26.3%24.5%
SAP (NYS: SAP) 4.48.7%24.2%30.6%
Microsoft (NAS: MSFT) 3.69.6%32.6%41.7%

Source: Reuters. TTM = trailing 12 months.

Clearly, Salesforce is not for the faint of heart. It sports gut-wrenchingly high multiples, and its GAAP results even turned up a net loss of $0.09 per share this last year. The company is rather generous with sock-based compensation for insiders, which is typically excluded in the non-GAAP results that the Street follows.

On a non-GAAP basis, Salesforce earned $1.36 last year. The takeaway is that Salesforce's underlying business is extremely robust, and it has growth rates to prove it. Truly disruptive Rule Breakers can sport premium multiples relative to traditional incumbents, and Rule Breaking Fools think these stocks deserve it.

What's next
People tend to either love it or hate it, but that hasn't stopped it from beating the market. While one of our Foolish services has even recommended a bearish trade, it's making fellow Fool Tim Beyers rich in his Big Idea Portfolio too. We Fools are a motley bunch, aren't we?

I think this classic Rule Breaker is set to keep delivering. Furthermore, I'm going to give salesforce.com an outperform CAPScall today alongside my bullish words.

Interested in more info on salesforce.com? Add it to yourWatchlist.

At the time this article was published Fool contributorEvan Niuholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Microsoft and Oracle.Motley Fool newsletter serviceshave recommended buying shares of salesforce.com and Microsoft, creating a bull call spread position in Microsoft, and creating a bear put spread position in salesforce.com. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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