1-Star Stocks Poised to Plunge: salesforce.com?

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, customer relations management, or CRM, software specialist salesforce.com (NYS: CRM) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Salesforce's business and see what CAPS investors are saying about the stock right now.

Salesforcefacts

Headquarters (founded)San Francisco (1999)
Market Cap$21.7 billion
IndustryApplication software
Trailing-12-Month Revenue$2.3 billion
ManagementCo-Founder/Chairman/CEO Marc Benioff
CFO Graham Smith
Return on Equity (average, past 3 years)5%
Cash/Debt$777.9 million / $557.2 million
CompetitorsMicrosoft
Oracle
SAP

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 48% of the 1,799 members who have rated Salesforce believe the stock will underperform the S&P 500 going forward.

A couple of months ago, one of those Fools, there4im, touched on the stock's seemingly unsustainable valuation:

Salesforce might have great software, but the stock is priced for perfection. I question the width of their [competitive moat] -- Can they fight off competition from Microsoft, SAP and others? I admit it might take a couple of years for the competition to catch up, but in the meantime, [Salesforce] does not seem to be cashing in all that well.

I suspect that two years from now, this will not be the darling of Wall Street that it is today. It will be just another software company -- with a down-to-earth multiple.

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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Microsoft and Oracle.  Motley Fool newsletter services have recommended buying shares of Salesforce and Microsoft. Motley Fool newsletter services have also recommended creating a bear put spread position in Salesforce and a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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