CRM Looks 38.4% Undervalued on GF Value™ After Strong Q2 Earnings
GuruFocus News
08/26/2026 15:56
On August 26, 2026, Salesforce Inc (NYSE: CRM) shares surged over 10% in after-hours trading following the release of its second-quarter fiscal 2027 earnings report, which notably beat adjusted EPS expectations and aligned with revenue forecasts. The company also announced a strategic partnership with Anthropic to bolster its AI capabilities, signaling continued innovation in its core cloud software business.
- GF Value™ verdict: CRM is trading at $205.62 versus a GF Value™ of $333.76, indicating it is approximately 38.4% undervalued.
- GF Score™: A robust 86/100, reflecting strong overall fundamentals and growth potential.
- Key financial signal: Insider activity shows net selling over the past 12 months, with $27.4 million purchased versus $59.3 million sold, while 21 premium gurus currently hold CRM shares, with a near-even split between additions and trims.
What’s Behind the News?
Salesforce’s impressive earnings beat on adjusted EPS — $5.90 versus the consensus $3.27 — drove the stock’s after-hours rally. Although revenue of $11.3 billion was in line with expectations, the company’s forward guidance for both EPS and revenue exceeded analyst estimates, underscoring confidence in its growth trajectory. The announcement of a new partnership with Anthropic, a leading AI research firm, highlights Salesforce’s commitment to integrating advanced artificial intelligence into its Customer 360 platform and other cloud services, aiming to enhance customer engagement and operational efficiency.
Founded as a pioneer in enterprise cloud computing, Salesforce operates in the technology sector within the software industry. It offers a comprehensive suite of customer relationship management CRM solutions, including Service Cloud, Marketing Cloud, Commerce Cloud, and MuleSoft for data integration. With a market capitalization of $168.40 billion, Salesforce remains a dominant player in cloud-based enterprise software, serving a global customer base with its innovative SaaS offerings.
Is CRM Overvalued or Undervalued?
According to GuruFocus’ proprietary GF Value™ metric, Salesforce is significantly undervalued at its current price of $205.62 compared to the intrinsic value estimate of $333.76. This 38.4% margin of safety suggests that the market may be underappreciating Salesforce’s future earnings potential and growth prospects, especially in light of its strong earnings beat and optimistic guidance. The GF Value™ calculation incorporates historical trading multiples, past business growth, and forward-looking performance estimates, providing a comprehensive valuation perspective.
Examining valuation multiples, CRM’s trailing twelve months (TTM) price-to-earnings (P/E) ratio stands at 23.8x, which is considerably below its five-year median P/E of 71.71x. This disparity further supports the undervaluation thesis, indicating that the stock is trading at a discount relative to its historical earnings multiple. Investors seeking value in a high-growth technology name may find this valuation gap compelling. For more details, see GF Value™.
What Does CRM’s GF Score™ Tell Us?
The GF Score™ is a composite measure designed to evaluate a company’s overall financial health, profitability, growth, valuation, and momentum. Salesforce’s GF Score™ of 86 out of 100 reflects a strong fundamental profile, particularly in growth and profitability, while highlighting areas for improvement in valuation and momentum.
| Metric | Rating |
|---|---|
| GF Score™ | 86/100 |
| Financial Strength | 5/10 |
| Profitability | 9/10 |
| Growth | 10/10 |
| Valuation | 4/10 |
| Momentum | 4/10 |
Salesforce’s strongest sub-ranks are in growth and profitability, reflecting consistent revenue and earnings expansion, as well as improving operating margins. The company’s Piotroski F-Score of 7 indicates a very healthy financial situation, and its Beneish M-Score of -2.94 suggests low risk of earnings manipulation. However, the lower scores in valuation and momentum signal that while the stock is undervalued, market sentiment and price momentum have yet to fully catch up. Financial strength is moderate, with an Altman Z-Score in the grey zone (2.37), suggesting some financial stress but no immediate bankruptcy risk. For a deeper dive, visit the CRM stock page.
What Are Gurus and Insiders Doing with CRM?
GuruFocus tracks 21 premium gurus holding Salesforce shares, with a nearly balanced pattern of 9 adding and 11 trimming positions in recent quarters. This mixed activity suggests cautious optimism among top institutional investors, reflecting both confidence in Salesforce’s long-term prospects and prudent portfolio management amid market volatility. Insider activity over the past 12 months shows net selling, with insiders offloading $59.3 million worth of shares against $27.4 million purchased. This net insider selling might indicate some profit-taking or personal liquidity needs, but it contrasts with the strong institutional interest from gurus, providing a nuanced view of ownership dynamics.
What This Means for Investors
Salesforce’s current valuation presents a compelling margin of safety, as indicated by a GF Value™ that is 38.4% higher than the market price, supported by a strong GF Score™ of 86. While the stock’s P/E ratio is well below its historical median, suggesting undervaluation, the tempered momentum and moderate financial strength scores caution investors to monitor ongoing developments closely. The mixed signals from insider selling and guru ownership highlight a complex landscape where institutional investors remain broadly confident, but insiders are more reserved. Overall, the valuation gap combined with solid growth and profitability metrics makes CRM an intriguing candidate for further analysis. For more insights, explore the CRM stock page or use the GuruFocus Stock Screener to compare with peers.
Frequently Asked Questions
What is CRM’s GF Score™?
CRM’s GF Score™ of 86/100 reflects a strong overall financial and operational profile, with particular strengths in growth and profitability, indicating solid business fundamentals.
Based on GuruFocus’ GF Value™, CRM is significantly undervalued by approximately 38.4%, trading at $205.62 compared to an intrinsic value estimate of $333.76.
What is CRM’s P/E ratio compared to historical?
CRM’s current trailing P/E ratio is 23.8x, substantially lower than its five-year median P/E of 71.71x, suggesting the stock is trading at a discount relative to its historical earnings multiples.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
Disclosures
I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.
