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What Is Salesforce’s Value Proposition in the Software Space?


Nov. 15 2016, Updated 10:04 a.m. ET

Salesforce’s scale in the software space

As of November 9, 2016, Microsoft (MSFT) continued to be the largest player by market capitalization in the global software space. It’s followed by Oracle (ORCL), IBM (IBM), SAP (SAP), and Salesforce (CRM).

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Enterprise value multiples and dividend yields

Salesforce was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~24.1x on November 9, 2016. This metric was higher than Microsoft’s ~10.5x. SAP and Oracle have multiples of ~12.6x and ~8.2x, respectively.

Microsoft’s forward annual dividend yield was ~2.6% as of November 9, 2016. Oracle’s and IBM’s forward annual dividend yields were ~1.5% and ~3.6%, respectively, as of November 8. Unlike its peers in the software space, Salesforce doesn’t pay dividends.

Investors who want to gain exposure to Salesforce can consider investing in the SPDR S&P 500 ETF (SPY). SPY has ~29% of its portfolio in application software and invests ~0.23% of its holdings in Salesforce.

In the next and final part of this series, we’ll see what analysts are recommending for Salesforce.


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