Good morning investors!

Every Thursday we release our latest “Deep Dive” — a high level, easy to follow stock analysis designed to give our IE+ members an EDGE when it comes to properly valuing a company. We do the heavy lifting so you can make more sound investing decisions.

Today’s deep dive target is Salesforce — the world’s largest enterprise software company in the world.

In today’s article we will look at the company’s performance, recent results, and dive deeper into its valuation to determine whether the stock is a BUY, SELL, or HOLD as we begin 2024, based on our opinion alone.

Before we share our research, what are your thoughts on Salesforce?

Alright, grab your coffee and let’s dive in.

Edge Score

We have been diligently working behind the scenes to develop several stock analysis systems for our members. Last week we unveiled our first tool — The Edge Scoring System.

The system takes tons of data and provides a score for 5 different metrics:

• Valuation

• Future Growth Projections

• Past Performance

• Financial Health

• Dividend

The system then takes these five metrics and provides an overall rating for the stock, which we will refer to as the Edge Score.

The model is still in beta testing and there will be adjustments to make the scoring as accurate as we can make it. In fact, Edge members in the Discord have had first access and already come up with great ideas and additions to make the scoring even better.

Here is our Edge Score for Salesforce:

Below, we will further break down each category and share our methodology for scoring for this company.

Company Background

Salesforce, Inc. was founded in 1999 and is currently headquartered in San Francisco, California. Salesforce provides Customer Relationship Management (CRM) technology that brings companies and customers together worldwide. The company’s service includes sales to store data, monitor leads and progress, forecast opportunities, gain insights through analytics and artificial intelligence, and deliver quotes, contracts, and invoices; and service that enables companies to deliver trusted and highly personalized customer support at scale.

When businesses are looking to become more efficient, they turn to a company like Saleforce. More efficient in terms of lowering costs, but also turning over more sales or sales leads. The company’s marketing services enables companies to plan, personalize, automate, and optimize customer marketing journey, connecting interaction, and connected products; and commerce services, which empowers shopping experience across various customer touchpoint, such as mobile, web, social, and stores and provides click-to-code tools that offers customers to build and deploy solutions.

Marc Benioff is a co-founder and the current CEO of Salesforce.

Source of Revenue

As a SaaS company, Salesforce generates the majority of their revenues through subscription-based services. Here are the company’s primary operating segments:

• Subscription and Support Revenue

  • CRM Platform

  • Cloud based solutions

  • Technical support

• Professional Services & Other Revenue

  • Trainings

  • Implementation

  • Company specific customization

Past Performance

In this section we will go over the company’s recent earnings results and dive into their financial performance over the last few years.

Stock Price History

Salesforce shares have risen 396% over the last 10 years .

Recent Earnings Report

In its recent quarterly report, Salesforce shares rose after reporting strong fiscal second-quarter results that beat both earnings and revenue estimates and the company raised its full-year profit outlook.

The company’s revenue grew 8% year-over-year to $9.33 billion, with net income increasing to $1.43 billion, or $1.47 per share, from $1.27 billion, or $1.28 per share, a year ago.

Salesforce’s adjusted operating margin of 33.7% exceeded analyst expectations. Operating cash flow rose 10% year-over-year, to $890 million. Free cash flow (which includes capital spending) rose 20%, to $760 million.

CFO Amy Weaver announced she will step down but will stay on until a successor is found and then serve as an advisor.

For the fiscal third quarter, Salesforce expects earnings of $2.42 to $2.44 per share on revenue of $9.31 billion to $9.36 billion, close to analyst estimates.

The company also raised its full-year guidance, projecting earnings of $10.03 to $10.11 per share and revenue growth of 8% to 9%. Salesforce increased its full-year adjusted operating margin guidance to 32.8%, up from the previous forecast of 32.5%.

CRM shares are +8.5% since reporting earnings on August 28th.

Income Statement

Through the first three quarters of 2024, shares of Salesforce have done nothing and much of that has to do with the company’s sales. For years, investors have become accustomed to strong growth figures with regular year over year growth surpassing 20%. However, that figure dropped to 11% last fiscal year and that growth figure is expected to fall into single digit category this year.

Is the growth over for this company? That is the primary questions investors are asking themselves, and I believe the answer is no. The company is implementing more and more AI features and developing strong partnerships with various companies to where I think this is more of a period of transition for a fantastic company.

The company looks to be turning things around and returning to its previous growth trajectory.

Thank you for joining us for this Deep Dive of Salesforce.

If you enjoyed this deep dive, be sure to LEAVE A COMMENT. We look forward to hearing your thoughts on Salesforce and our analysis. And let us know what stocks you want to see in the future.

Thank you, and until next time investors!

Mark & Chris

The Investor’s Edge

Disclosure

This deep dive is for educational and informational purposes only. The authors are NOT financial advisors, thus cannot recommend for you to personally to buy or sell any positions. Positions taken on a particular stock are opinions of the authors and only the authors. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.