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Where Does Salesforce Stand in the Software Space?


Jun. 27 2016, Updated 11:05 a.m. ET

Salesforce’s scale in the software space

Earlier in this series, we discussed Salesforce’s (CRM) multibillion-dollar acquisition. Now, let’s look at where the company’s value proposition stands in the US software space.

Let’s start with Salesforce’s size. As of June 15, 2016, Microsoft (MSFT) was the largest player by market capitalization in the software space, as shown in the above chart. It was followed by Oracle (ORCL), IBM (IBM), SAP (SAP), and Salesforce.

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Salesforce’s enterprise value multiples

Salesforce was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~24.6x on June 15, 2016. This was higher than Microsoft’s ~9.4x. The same metric was ~10.8x for SAP and 8.7x for Oracle.

Salesforce’s dividend yield

Microsoft’s forward annual dividend yield was ~2.9% as of June 15, 2016. Oracle’s and IBM’s forward annual dividend yields were ~1.6% and ~3.7%, respectively, as of May 18. Unlike its peers in the software space, Salesforce doesn’t pay dividends.

Investors who want exposure to Salesforce could consider investing in the SPDR S&P 500 ETF (SPY). SPY has a ~29% exposure to application software. It invests ~0.23% of its holdings in Salesforce. In the final part of our series, we’ll see what analysts are recommending for Salesforce.


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