Thinking about what to do with Salesforce stock? You are not alone, and these days, there is more buzz and debate than ever. With a closing price of $254.83, Salesforce has seen its share price climb 4.8% in the past week and 4.7% over the last month, suggesting renewed interest or maybe just a touch of optimism in the cloud computing giant. Yet if you zoom out, the longer-term picture is less rosy: the stock is down 22.9% year-to-date and has slipped 11.7% over the past year. Still, investors with a multiyear perspective have been rewarded, as Salesforce boasts a 58% return over three years and nearly 11% over the last five.
Behind these moves is a stream of headline news, from Salesforce’s expansion efforts to high-profile partnerships with major enterprise clients. Most recently, the company’s push into AI-driven solutions has caught Wall Street’s eye, promising new growth avenues while also ramping up competition. This narrative of innovation, coupled with shifting market risk perceptions, seems to be playing a part in the stock’s recent bounce.
But what about valuation? Across six different checks, Salesforce scores a 4 out of 6 for being undervalued. This is an encouraging sign, but not the whole story. To really make sense of whether Salesforce is a buy, hold, or sell today, it is important to dig into exactly how analysts measure value, and consider whether there might be an even more insightful way to look at the big picture before making your decision.
Why Salesforce is lagging behind its peers
Approach 1: Salesforce Discounted Cash Flow (DCF) Analysis
The Discounted Cash Flow (DCF) model is a key tool for investors, aiming to estimate a company’s true worth by projecting its future cash flows and discounting them back to today’s dollars. The basic principle is that a business is only worth the cash it can generate over time, adjusted for the fact that a dollar today is worth more than a dollar in the future.
In Salesforce’s case, analysts estimate its current Free Cash Flow (FCF) at $12.4 billion. Over the next decade, this figure is expected to grow, with projections for 2030 reaching $19.5 billion. While analyst forecasts generally focus on the next five years, longer-term estimates are extrapolated by financial tools to help round out the valuation picture. This steady increase in annual FCF highlights confidence in Salesforce’s core business model and growth prospects.
After applying these FCF forecasts and discounting them to present value, the DCF model calculates an intrinsic fair value of $345.88 per share. With Salesforce’s latest share price at $254.83, the market is currently pricing the stock at a 26.3% discount to its intrinsic value according to this method. For long-term investors, this suggests that Salesforce may be trading below its estimated fair value at current levels.
Result: UNDERVALUED
CRM Discounted Cash Flow as at Oct 2025
Our Discounted Cash Flow (DCF) analysis suggests Salesforce is undervalued by 26.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
Approach 2: Salesforce Price vs Earnings
For profitable companies like Salesforce, the Price-to-Earnings (PE) ratio is a widely used and effective valuation tool. It helps investors gauge how much they are paying for each dollar of current earnings, making it a practical measure for businesses generating steady profits.
What makes a “normal” or “fair” PE ratio can vary depending on expectations for future growth and risks faced by the company and its industry. Fast-growing firms often command higher PE ratios, reflecting investor optimism about expanding profits. In contrast, companies with higher perceived risks or slower growth prospects usually trade at lower PE multiples.
Currently, Salesforce trades at a PE ratio of 36.4x. This compares to an industry average PE of 33.3x and a peer group average of 61.7x, putting Salesforce above its sector but well below more aggressively valued competitors. To provide a more refined perspective, Simply Wall St calculates a proprietary “Fair Ratio” for Salesforce at 44.4x. Unlike simple averages, the Fair Ratio incorporates the company’s earnings growth, profit margins, market cap, risk factors, and industry nuances, offering a tailored benchmark that reflects Salesforce’s unique profile more accurately than a one-size-fits-all average.
Comparing these numbers, Salesforce’s current PE is below the Fair Ratio, indicating that based on these holistic factors, the stock may be trading at an attractive valuation relative to its growth and risk outlook.
Result: UNDERVALUED
NYSE:CRM PE Ratio as at Oct 2025
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Upgrade Your Decision Making: Choose your Salesforce Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your story, the logic and perspective you bring to a company, connecting what you believe about Salesforce’s business, growth opportunities, or challenges to what that means for future revenue, earnings, profit margins, and ultimately, what you see as a fair value for the stock.
Instead of just following the numbers, Narratives help you link Salesforce’s actual story, such as its push into AI, leadership in enterprise cloud, or the risks of slowing growth, to a clear financial forecast and fair value estimate. Narratives turn your view into a structured forecast, making your investment thesis visible and measurable.
Simply Wall St’s Community page makes creating and sharing a Narrative quick and easy. Millions of investors use this tool to outline their logic, set their own fair values, and instantly see how their outlook compares to the market. If your Narrative’s fair value is above the current price, that may point to a buy. If below, maybe a pass or a sell. Because Narratives update as news and results come out, you can always see how fresh information changes your investment rationale.
For example, someone bullish on Salesforce’s AI investments and margin expansion might set a high fair value near $430, while a more cautious investor focused on industry risks might land closer to $221. This shows just how much perspective shapes an investing decision.
For Salesforce, however, we’ll make it really easy for you with previews of two leading Salesforce Narratives:
Fair Value: $334.68
Current Price is 23.9% below fair value
Forecast Revenue Growth Rate: 9.6%
AI-powered automation and digital reinvention are expected to drive ongoing customer adoption. This may strengthen Salesforce’s business moat and support both revenue and margin expansion. An expanding focus on mid-market and SMB clients, along with disciplined cost control and capital returns, is enabling broader and more scalable profitability. Key risks include mounting competition, challenges from regulatory changes, and potential pitfalls in integrating acquisitions. However, consensus analyst targets suggest there could be further upside from today’s price.
Fair Value: $223.99
Current Price is 13.8% above this fair value
Forecast Revenue Growth Rate: 13%
Salesforce has cemented its position as an enterprise cloud leader, but market growth expectations are lofty and margin improvements from restructuring may be largely behind it. Heavy reliance on a concentrated base of large customers and a saturated enterprise market could limit future growth and introduce higher risk. Further acquisitions may also constrain free cash flow. Although AI and cloud innovation help support long-term growth, the premium valuation reflects high optimism. If Salesforce cannot continue accelerating growth, shares could be vulnerable to a pullback.
Do you think there’s more to the story for Salesforce? Create your own Narrative to let the Community know!
NYSE:CRM Community Fair Values as at Oct 2025
This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.
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