Showing posts with label MSFT. Show all posts
Showing posts with label MSFT. Show all posts

Wednesday, December 1, 2021

Can Salesforce (CRM) continue growing to justify its valuation?

Salesforce (CRM) grew at a breakneck speed over the past two decades. The is hoping that the growth will continue in this decade.

The company's free cash flow yield is very similar to that of Microsoft (MSFT) and Adobe (ADBE). Salesforce's free cash flow yield has been consistently around the 2% level over the past decade. Microsoft and Adobe have seen their market capitalization and earnings multiple expand over the years causing their free cash flow yield to drop. I might have to look into their number more closely. 

Exhibit: Free Cash Flow Yield
(Source: Seeking Alpha)

Salesforce is lagging behind Microsoft (MSFT) and Adobe (ADBE) on return on equity. Both those companies have more than 8x more return on equity than Salesforce.  

  Exhibit: Return on Equity

(Source: Seeking Alpha)

Microsoft and Adobe have 6x and 8x more return on invested capital (ROIC) compared to Salesforce. 

Exhibit: Return on Invested Capital 

(Source: Seeking Alpha)

Salesforce's EBITDA margin is much lower than that of Microsoft and Adobe.  

Exhibit: EBITDA Margin
(Source: Seeking Alpha)

Salesforce's EV to EBITDA multiple is higher than that of Microsoft and Adobe.  

                               Exhibit: EV to EBITDA Multiple for Salesforce, Microsoft, and Adobe.  

   (Source: Seeking Alpha)                                         

Salesforce's year-over-year quarterly revenue growth (See Exhibit: Year-over-Year Revenue Growth) has converged with Microsoft and Adobe.  

    Exhibit: Year-over-Year Revenue Growth

(Source: Seeking Alpha)

Salesforce's price to earnings growth ratio (See Exhibit: Salesforce, Microsoft, and Adobe PEG Ratio) was attractive during the past decade compared to Microsoft and Adobe. If the company's growth can continue, that would justify its higher valuation multiple compared to Microsoft and Adobe. Salesforce's revenue is already in the high $20 billion, so for it to grow at a 20% rate would take some work.  

                                        Exhibit: Salesforce, Microsoft, and Adobe PEG Ratio

(Source: Seeking Alpha)

Wednesday, July 29, 2020

Big Tech is Taking a Break From the Rally

    Both Apple (AAPL) and Microsoft (MSFT) are trading below its 10-day moving average. Apple is down from its 52-week high of $399.82 and currently trades at $380.16. That's a drop from the 52-week high of - 4.97%. Apple's 10-day moving average is 382.436 (Tuesday, July 28, 2020). Microsoft is down from $216.38 to $204.06 that's a -5.6% change. Its 10-day moving average is $202.15. Amazon (AMZN), Facebook (FB), and Alphabet (GOOG) are all trading below their 10-day moving average. Out of this cohort only Facebook is trading below its 50-day moving average. 

Exhibit: Big Tech's Downturn has Started. When will it end? 

(Source: SECURFII)

    Microsoft has gained 53% from its lows in March 2020. Apple has gained 76% form its March 2020 lows.  The gains have been spectacular. Google has gained 50% from its March lows. Amazon has gained nearly 82% from its March 2020 lows.     

    It seems like all these stocks are starting a downward trend after the huge run-up they have had over the last few years and the rebound they have had since the pandemic induced crash of March 2020.           

Paccar: Peak Demand For Trucks

 Paccar ( PCAR ) produced 185,900 trucks in 2022 and is on track for another record year in 2023. The company has experienced good revenue ...