Market Analysis: Salesforce And Competitors In Software Industry

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In the fast-paced and highly competitive business world of today, conducting thorough company analysis is essential for investors and industry observers. In this article, we will conduct an extensive industry comparison, evaluating Salesforce CRM in relation to its major competitors in the Software industry. Through a detailed examination of key financial metrics, market standing, and growth prospects, our objective is to provide valuable insights and illuminate company's performance in the industry.

Salesforce Background

Salesforce Inc 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 64.25 4.39 7.62 2.46% $2.75 $7.14 10.77%
SAP SE 87.86 4.81 6.59 -1.92% $-0.42 $5.76 8.06%
Adobe Inc 45.71 13.87 11 3.88% $1.21 $4.59 11.32%
Intuit Inc 55.47 8.95 10.77 13.4% $3.34 $5.67 11.95%
Synopsys Inc 64.17 12.60 14.49 4.23% $0.41 $1.15 15.2%
Cadence Design Systems Inc 77.17 22.60 19.83 7.1% $0.36 $0.88 -1.23%
Workday Inc 38.37 7 7.61 1.32% $0.14 $1.5 3.52%
Roper Technologies Inc 39.15 3.21 8.98 2.17% $0.73 $1.18 14.36%
Palantir Technologies Inc 175.42 12.42 21.14 2.91% $0.09 $0.52 20.78%
Autodesk Inc 50.22 24.27 8.27 16.9% $0.35 $1.34 3.89%
Datadog Inc 359.35 18.56 19.45 2.02% $0.06 $0.5 26.89%
Ansys Inc 65.88 5.29 12.89 5.29% $0.09 $0.4 15.99%
AppLovin Corp 50.14 36.03 8.18 23.28% $0.45 $0.76 47.9%
PTC Inc 75.15 7.31 9.62 3.98% $0.21 $0.49 11.23%
Tyler Technologies Inc 108.65 6.73 10.32 1.82% $0.11 $0.22 8.58%
Zoom Video Communications Inc 22.90 2.31 4.23 2.65% $0.23 $0.87 3.25%
Bentley Systems Inc 48.81 16.97 14.03 7.74% $0.12 $0.28 7.43%
Manhattan Associates Inc 73.79 58.02 14.67 20.78% $0.06 $0.14 15.18%
Dynatrace Inc 88.56 6.79 9.63 1.93% $0.04 $0.31 21.11%
Average 84.82 14.87 11.76 6.64% $0.42 $1.48 13.63%

When conducting a detailed analysis of Salesforce, the following trends become clear:

  • A Price to Earnings ratio of 64.25 significantly below the industry average by 0.76x suggests undervaluation. This can make the stock appealing for those seeking growth.

  • Considering a Price to Book ratio of 4.39, which is well below the industry average by 0.3x, the stock may be undervalued based on its book value compared to its peers.

  • Based on its sales performance, the stock could be deemed undervalued with a Price to Sales ratio of 7.62, which is 0.65x the industry average.

  • The Return on Equity (ROE) of 2.46% is 4.18% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.

  • The company exhibits higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $2.75 Billion, which is 6.55x above the industry average, implying stronger profitability and robust cash flow generation.

  • The gross profit of $7.14 Billion is 4.82x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.

  • The company is witnessing a substantial decline in revenue growth, with a rate of 10.77% compared to the industry average of 13.63%, which indicates a challenging sales environment.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio helps evaluate the capital structure and financial leverage of a company.

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:

  • Salesforce demonstrates a stronger financial position compared to its top 4 peers in the sector.

  • With a lower debt-to-equity ratio of 0.21, the company relies less on debt financing and maintains a healthier balance between debt and equity, which can be viewed positively by investors.

Key Takeaways

For Salesforce in the Software industry, the PE, PB, and PS ratios indicate that the company is undervalued compared to its peers. However, the low ROE suggests that Salesforce may not be utilizing its equity effectively. On the other hand, the high EBITDA and gross profit signify strong operational performance, while the low revenue growth implies a potential need for strategic expansion to align with industry trends.

This article was generated by Benzinga's automated content engine and reviewed by an editor.

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