Salesforce

Methodology

Salesforce's cloud software model generates predictable subscription earnings with high visibility, though stock-based compensation distorts GAAP EPS significantly. Non-GAAP operating income provides clearer profitability trends for fair value calculations. The method works best when focusing on normalized free cash flow rather than reported earnings given SBC headwinds.

Methodology

Salesforce typically trades at PEG ratios between 1.5-2.5x based on non-GAAP earnings, reflecting premium valuations for its CRM market leadership and recurring revenue model. The company's transition toward profitability improvement supports current multiples despite slowing growth. PEG becomes more relevant as the business matures and free cash flow generation accelerates.

Methodology

Salesforce doesn't pay dividends and focuses capital allocation on strategic M&A (Slack, Tableau) and share repurchases to offset stock dilution. The company prioritizes platform expansion over cash returns. Total return depends on earnings growth acceleration and multiple expansion as AI capabilities enhance the CRM platform's value proposition.