San Francisco, Calif.-based cloud computing industry pioneer Salesforce.com Inc. (CRM) has seen its shares skyrocket since going public in June 2004. With an IPO price of $11 per share, the company founded by legendary Silicon Valley visionary Marc Benioff, has seen its stock grow over 8.2 times, equating to a market cap of $64.2 billion as of August 2017.
While waves of new marketing technology startups have emerged in hopes to threaten the long-time industry leader, Salesforce has remained in the clear leadership position, reflected in the Street’s average one-year target estimate of $101.66, implying a near 13% upside.
In 2017, Salesforce stock has outperformed the market significantly, generating an approximate 32% return versus the S&P 500’s 10% gain over the same period. While investors often remain cautious on rising stock prices as a sign of overvaluation, an ongoing run can also indicate a solid, profitable company that was once undervalued by the market. In 2018, Salesforce expects its sales growth to accelerate as much as 23%.
For investors looking to grab a share of the Software-as-a-Service (SaaS) market through CRM stock, they can expect to pay a price-to-sales ratio of 7.1, compared to the industry average at 5.5. CRM bulls employ the “you get what you pay for” mentality, highlighting the eighteen-year-old firm’s continued growth story. In the most recent second quarter, Salesforce posted revenue and operating cash flow up 25% and 17% respectively year-over-year (YOY).
At large, while lofty expectations for the CRM market leader may present short-term volatility, Salesforce is a solid play for long-term investors seeking a market leader with a tried-and-true business model.