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Wall Street JournalAnalyzing Salesforce In Comparison To Competitors In Software Industry
In the dynamic and cutthroat world of business, conducting thorough company analysis is essential for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating Salesforce (NYSE:CRM) and its primary competitors in the Software industry. By closely examining key financial metrics, market position, and growth prospects, our aim is to provide valuable insights for investors and shed light on company's performance within the industry.
Salesforce Background
Salesforce provides enterprise cloud computing solutions. The company offers customer relationship management technology that brings companies and customers together. Its Customer 360 platform helps the group to deliver a single source of truth, connecting customer data across systems, apps, and devices to help companies sell, service, market, and conduct commerce. It also offers Service Cloud for customer support, Marketing Cloud for digital marketing campaigns, Commerce Cloud as an e-commerce engine, the Salesforce Platform, which allows enterprises to build applications, and other solutions, such as MuleSoft for data integration.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| Salesforce Inc | 50.24 | 4.78 | 7.75 | 2.44% | $2.79 | $7.17 | 8.39% |
| SAP SE | 97.28 | 5.88 | 7.59 | 2.1% | $1.94 | $6.02 | 9.72% |
| Adobe Inc | 43.01 | 15.37 | 11 | 11.46% | $2.31 | $4.85 | 10.59% |
| Intuit Inc | 59.24 | 9.39 | 10.78 | -0.11% | $0.13 | $2.4 | 17.4% |
| Palantir Technologies Inc | 249.59 | 23.46 | 40.66 | 3.43% | $0.11 | $0.55 | 27.15% |
| Synopsys Inc | 53.38 | 10.32 | 12.44 | 5.49% | $0.46 | $1.24 | 12.65% |
| Cadence Design Systems Inc | 69.82 | 17.32 | 17.68 | 5.86% | $0.38 | $0.92 | 8.61% |
| Workday Inc | 42.21 | 7.77 | 8.36 | 1.6% | $0.28 | $1.57 | 16.68% |
| Autodesk Inc | 58.72 | 24.96 | 10.69 | 12.17% | $0.39 | $1.36 | 11.9% |
| Roper Technologies Inc | 41.58 | 3.29 | 9.12 | 1.88% | $0.69 | $1.19 | 12.12% |
| AppLovin Corp | 61.45 | 58.99 | 12.73 | 39.35% | $0.51 | $0.8 | 43.98% |
| Datadog Inc | 269.96 | 17.77 | 19.52 | 1.9% | $0.06 | $0.52 | 26.66% |
| Ansys Inc | 58.10 | 5.14 | 12.39 | 2.37% | $0.2 | $0.52 | 19.64% |
| Tyler Technologies Inc | 124.44 | 8.19 | 12.76 | 2.2% | $0.12 | $0.24 | 7.28% |
| PTC Inc | 75.11 | 7.33 | 9.99 | 2.32% | $0.13 | $0.41 | -4.37% |
| Zoom Video Communications Inc | 24.44 | 2.47 | 4.67 | 2.6% | $0.23 | $0.88 | 2.09% |
| Manhattan Associates Inc | 91.89 | 76.71 | 18.89 | 21.98% | $0.07 | $0.15 | 14.85% |
| Dynatrace Inc | 103.23 | 7.73 | 10.77 | 1.89% | $0.06 | $0.32 | 19.93% |
| Bentley Systems Inc | 43.47 | 15.35 | 12.97 | 7.52% | $0.1 | $0.27 | 11.32% |
| Average | 87.05 | 17.64 | 13.5 | 7.0% | $0.45 | $1.34 | 14.9% |
By conducting a comprehensive analysis of Salesforce, the following trends become evident:
The stock's Price to Earnings ratio of 50.24 is lower than the industry average by 0.58x, suggesting potential value in the eyes of market participants.
The current Price to Book ratio of 4.78, which is 0.27x the industry average, is substantially lower than the industry average, indicating potential undervaluation.
With a relatively low Price to Sales ratio of 7.75, which is 0.57x the industry average, the stock might be considered undervalued based on sales performance.
With a Return on Equity (ROE) of 2.44% that is 4.56% below the industry average, it appears that the company exhibits potential inefficiency in utilizing equity to generate profits.
With higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $2.79 Billion, which is 6.2x above the industry average, the company demonstrates stronger profitability and robust cash flow generation.
Compared to its industry, the company has higher gross profit of $7.17 Billion, which indicates 5.35x above the industry average, indicating stronger profitability and higher earnings from its core operations.
The company's revenue growth of 8.39% is significantly lower compared to the industry average of 14.9%. This indicates a potential fall in the company's sales performance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a key indicator of a company's financial health and its reliance on debt financing.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
When examining Salesforce in comparison to its top 4 peers with respect to the Debt-to-Equity ratio, the following information becomes apparent:
Compared to its top 4 peers, Salesforce has a stronger financial position indicated by its lower debt-to-equity ratio of 0.2.
This suggests that the company relies less on debt financing and has a more favorable balance between debt and equity, which can be seen as a positive attribute by investors.
Key Takeaways
For Salesforce, the PE, PB, and PS ratios are all low compared to industry peers, indicating potential undervaluation. However, the low ROE suggests lower profitability compared to peers. The high EBITDA and gross profit levels are positive indicators of strong financial performance. The low revenue growth rate may be a concern for future prospects compared to industry peers in the Software sector.
This article was generated by Benzinga's automated content engine and reviewed by an editor.