Article by Rich Smith of The Motley Fool and CRM's Free Cash Flow Valuation vs. Peers
After CRM rose by 17% on Friday, Rich Smith notes that this stock is now trading at 50 times annual free cash flow, which is significantly above industry average. Rich also notes that CRM's gross margin has likely peaked. He concludes- by saying that he doubts CRM's growth story can continue justifying the 50 times cash flow valuation.
After further analysis of its peers' free cash flow valuation, you will see why CRM is severely overpriced and the bubble is bound to burst:
Oracle: 13x Intuit: 14x McAfee: 14x (and many analysts said Intel overpaid) SAP: 18x Akamai: 21x Infosys: 23x Citrix: 23x (this is another high flier) VMware: 34x (another high flier in cloud computing) CRM: 50x
If after reviewing the above you still think this stock has more room on the upside at this level, then you really should not trade stock for a living.