Salesforce (NYSE:CRM) stock has declined over 15% so far this year. While there has been a broader sell-off in markets triggered by President Donald Trump’s tariff confirmation, Salesforce’s outlook reported last month fell short of analyst expectations, as the company is seeing slower-than-expected adoption of its AI-powered Agentforce platform, weighing on its stock price.
Now, at levels of $280, CRM stock looks attractive but volatile – making it a tricky pick to buy. We believe there is minimal cause for concern with CRM stock, which makes it attractive but highly sensitive to adverse events as its current valuation is very high.
We arrive at our conclusion by comparing the current valuation of CRM stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Salesforce along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very strong operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How does Salesforce’s valuation look vs. the S&P 500?
Going by what you pay per dollar of sales or profit, CRM stock looks expensive compared to the broader market.
• Salesforce has a price-to-sales (P/S) ratio of 7.7 vs. a figure of 3.2 for the S&P 500
• Additionally, the company’s price-to-operating income (P/EBIT) ratio is 38.8 compared to 24.3 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 22.7 vs. the benchmark’s 24.3
How have Salesforce’s revenues grown over recent years?
Salesforce’s Revenues have seen notable growth over recent years.
• Salesforce has seen its top line grow at an average rate of 14.3% over the last 3 years (vs. increase of 6.3% for S&P 500)
• Its revenues have grown 9.5% from $34 Bil to $37 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
• Also, its quarterly revenues grew 8.3% to $9.4 Bil in the most recent quarter from $8.7 Bil a year ago (vs. 5.0% improvement for S&P 500)
How profitable is Salesforce?
Salesforce’s profit margins are higher than most companies in the Trefis coverage universe.
• Salesforce’s Operating Income over the last four quarters was $7.3 Bil, which represents a moderate Operating Margin of 19.7% (vs. 13.0% for S&P 500)
• Salesforce’s Operating Cash Flow (OCF) over this period was $13 Bil, pointing to a high OCF-to-Sales Ratio of 33.7% (vs. 15.7% for S&P 500)
Does Salesforce look financially stable?
Salesforce’s balance sheet looks strong.
• Salesforce’s Debt figure was $11 Bil at the end of the most recent quarter, while its market capitalization is $267 Bil (as of 3/14/2025). This implies a very strong Debt-to-Equity Ratio of 4.0% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $13 Bil of the $91 Bil in Total Assets for Salesforce. This yields a moderate Cash-to-Assets Ratio of 14.0% (vs. 14.8% for S&P 500)
How resilient is CRM stock during a downturn?
CRM stock has fared worse than the benchmark S&P 500 index during some of the recent downturns. Worried about the impact of a market crash on CRM stock? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• CRM stock fell 49.8% from a high of $255.46 on 3 January 2022 to $128.27 on 18 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 1 December 2023
• Since then, the stock has increased to a high of $367.87 on 4 December 2024 and currently trades at around $280
Covid Pandemic (2020)
• CRM stock fell 35.7% from a high of $193.36 on 20 February 2020 to $124.30 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 6 July 2020
Global Financial Crisis (2008)
• CRM stock fell 70.5% from a high of $18.61 on 23 June 2008 to $5.49 on 19 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 29 December 2009
Putting all the pieces together: What it means for CRM stock
In summary, Salesforce’s performance across the parameters detailed above are as follows:
• Growth: Very Strong
• Profitability: Strong
• Financial Stability: Very Strong
• Downturn Resilience: Strong
• Overall: Very Strong
Hence, despite its very high valuation, the stock appears attractive but volatile, which supports our conclusion that CRM is a tricky stock to buy.
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