Analyzing salesforce.com, inc.'s (NYSE:CRM) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess CRM's recent performance announced on 31 July 2019 and compare these figures to its long-term trend and industry movements.
Have CRM's earnings improved against past performances and the industry?
CRM's trailing twelve-month earnings (from 31 July 2019) of US$950m has declined by -0.6% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 72%, indicating the rate at which CRM is growing has slowed down. Why is this? Well, let’s take a look at what’s occurring with margins and whether the whole industry is feeling the heat.
In terms of returns from investment, salesforce.com has fallen short of achieving a 20% return on equity (ROE), recording 5.5% instead. Furthermore, its return on assets (ROA) of 3.1% is below the US Software industry of 6.6%, indicating salesforce.com's are utilized less efficiently. However, its return on capital (ROC), which also accounts for salesforce.com’s debt level, has increased over the past 3 years from 1.6% to 3.0%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 48% to 17% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I suggest you continue to research salesforce.com to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CRM’s future growth? Take a look at our free research report of analyst consensus for CRM’s outlook.
- Financial Health: Are CRM’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 July 2019. This may not be consistent with full year annual report figures.
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