Artificial intelligence (AI) is the hottest theme in the technology realm right now. Indeed, megacap behemoths such as the “Magnificent Seven” are innovating at light-speed paces and investors can’t seem to get enough.
Beyond the biggest of the big tech players, numerous other enterprise software businesses have garnered Wall Street’s interest. Salesforce.com (NYSE: CRM) makes for one of the most interesting case studies as it relates to AI software.
With shares down roughly 12% year to date, Salesforce is drastically underperforming the Nasdaq Composite and S&P 500 indexes. Nevertheless, I see the company as a compelling investment opportunity, and I think shares are dirt cheap.
Scrutiny at Salesforce
Since 2018, Salesforce has spent nearly $50 billion to acquire three companies: MuleSoft, Tableau, and Slack.
To put this into perspective, Salesforce has generated only about $35.7 billion in revenue over the last 12 months. Considering that the three companies mentioned above have been part of the Salesforce ecosystem for several years now, it’s reasonable to conclude that the company may not be monetizing these assets as well as it could.
Moreover, given that artificial intelligence (AI) is the bedrock of the tech realm right now, investors appear to be uninspired by Salesforce’s paltry 11% revenue growth for its most recent fiscal quarter, which ended April 30.
On the surface, I’d say these concerns are valid. However, a deeper dive into the company’s latest earnings report sheds light on where Salesforce is witnessing impressive growth, and more importantly, how the operating efficiencies management has been pursuing are finally beginning to materialize.
Image source: Getty Images.
Looking beyond revenue
Although the headline numbers on an income statement are useful for getting a sense of a company’s sales and profitability profiles, getting too caught up in these metrics alone can cause investors to miss the bigger picture.
The chart below features some other financial indicators that I’d encourage investors to analyze.
CRM Gross Profit Margin (Quarterly) Chart
There…
..
