Salesforce Stock Has More Than Just Great Cashflow Going for It

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Salesforce (NYSE:CRM) is currently trading around 54 times its forward earnings, which makes Salesforce stock both expensive and a little contentious.

Salesforce Stock Has More Than Just Great Cashflow Going for It

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My InvestorPlace colleague Thomas Niel believes Salesforce stock remains high “due to the sexiness of ‘SaaS’” and its 20% growth projectionsBack in March, I suggested that investors should buy Salesforce stock despite its weak guidance for 2020. The big reason: Salesforce has increased its free cash flow for eight consecutive years with most of the increases 20% or more. 

At the time, the CRM stock price was $155. Today, it’s barely above that. 

Yet, I still feel like CRM stock is worth owning for the long haul, but not for financial or operational reasons most financial gurus would trot out to back up their position.

Corporate Responsibility and Salesforce Stock

No, I believe Salesforce stock is worth owning because of the man at the top. Salesforce co-CEO and co-founder Marc Benioff. 

While most chief executives wouldn’t spend much time worrying about social issues such as homelessness, Benioff’s jumped right in to help get San Francisco’s Proposition C passed, and that’s irked some in the business world. 

Why should a tech company care about homelessness?

Because Salesforce, led by Benioff, understands that a healthy San Francisco is good for everyone in the Bay Area. Business, individuals, governments, and all the other stakeholders that make the city buzz. 

“Prop C could increase Salesforce’s annual taxes by about $10 million to $12 million. Meanwhile, we expect revenues this year of $13 billion. Small and medium-sized business and individual taxpayers are exempt — they will pay nothing,” Benioff wrote in a November 2018 opinion piece in the San Francisco Chronicle days before the Prop C vote. 

Prop C passed on Nov. 7, 2018, despite opposition from Twitter (NYSE:TWTR) CEO Jack Dorsey and others. Almost a year later, Prop C faces legal challenges from several different business and taxpayer groups who believe the process to levy special taxes was watered down by the city to make it easier to pass such legislation. 

While I can’t say what the ultimate conclusion will be to these legal challenges, I can say that Benioff’s concern for the homeless rings far truer than anything Jack Dorsey’s ever done — and I’m a big fan of Square (NYSE:SQ), Dorsey’s business that helps millions of small businesses process payments for their customers in person and online.    

A New Capitalism

One of the things I like to do after reading a contentious article is to read the comments afterward. Not many websites allow comments these days because people do tend to get a little unhinged when trying to persuade others that their viewpoint is the correct one. 

Benioff’s recent comments in a New York Times op-ed about the world needing a new form of capitalism is a perfect example.

In the United States, income inequality has reached its highest level in at least 50 years, with the top 0.1 percent — people like me — owning roughly 20 percent of the wealth while many Americans cannot afford to pay for a $400 emergency. It’s no wonder that support for capitalism has dropped, especially among young people,” Benioff wrote.

Benioff’s argument is that the distribution of wealth has gotten so out of whack, only a concerted effort by corporate America to focus on all stakeholders, and not just shareholders, will reduce the inequality that exists. 

Yet, in the comments section, you see this kind of response to Benioff’s thoughtful words.

“I’m sorry, but it’s not ours. If I work my tail off and work smart, you don’t have the right to take it. It’s not yours to take. You didn’t earn it,” someone from New York City commented. “Create your own wealth. Work hard. Work smart. Invest, sacrifice, and maybe even invest in your own idea. Claiming you are owed the fruits of other people’s labor isn’t just socialism, it’s wrong.”

As someone who spends a fair bit of time writing about excessive CEO compensation, I scratch my head when anyone defends the compensation packages of America’s top CEOs. To suggest that a CEO is taking a risk to run a multi-billion-dollar company, when in fact, the rank and file could run the business while the CEO took a year-long sabbatical is beside the point. 

Hired guns are not risk-takers. Never were. Never will be. 

I lost faith in unions a long time ago. In my experience, they became more about holding power over their members than actually improving their lot. 

But now, as billionaires such as Marc Benioff come forward, and admit that the current system serves nobody in the long run, I realize that unions might be the average person’s only silver lining. That’s because governments are either unwilling or unable to help them. 

The Bottom Line on Salesforce Stock

Today, I read that McDonald’s (NYSE:MCD) CEO Steve Easterbrook resigned over an inappropriate consensual relationship with a direct or indirect subordinate, which is against the Golden Arches’ corporate policies. 

I realize these things happen all the time. I’m certainly not condemning Easterbrook’s actions. It was an error in judgment. Everybody will move on. 

However, as a shareholder of Salesforce, isn’t nice to know your co-CEO is battling subjects that really matter such as homelessness and inequality. 

As Benioff said, “Capitalism, as we know it, is dead.” 

I’d gladly pay more for a company that’s got soul. Every day of the week. 

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


Article printed from InvestorPlace Media, https://investorplace.com/2019/11/salesforce-stock-more-than-great-cashflow/.

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