Salesforce (CRM) Stock Still Looks Cheap On Value But Weak On Returns

Salesforce stock has dropped 34.4% over the past year even as broader valuation checks still suggest the shares lean cheap. This puts the current price in the middle of a tug-of-war between weak recent returns and a relatively supportive valuation profile.

• Over the last 12 months, Salesforce is down 34.4%, a drawdown that has reset expectations and pushed investors to reassess what a reasonable entry price looks like.
• On one side, large AI related investments and mixed sentiment around the Agentforce platform can support long term growth hopes. On the other side, concerns about enterprise software budgets and stock downgrades may weigh on how much investors are willing to pay today.
• Against that backdrop, Salesforce screens as undervalued on the broader checks, with the company passing 5 of 6 valuation tests. This points to a stock that currently looks more like a potential bargain than a clear trap.

The issue now is whether Salesforce’s weaker share performance has already priced in the key risks, or if the current discount is still too small for the uncertainty investors are taking on.

Find out why Salesforce's -34.4% return over the last year is lagging behind its peers.

Is Salesforce Still Cheap on Earnings?

The P/E multiple fits Salesforce well because it is an established software company with a clear earnings base. Salesforce currently trades at about 17.4x earnings, compared with a Software industry average of roughly 28.8x and a peer group around 50.8x. That places the stock at a steep discount to both the broader sector and closer peers that investors often associate with higher growth or premium positioning.

A tailored fair P/E ratio for Salesforce, which adjusts for the company’s growth profile, margins, scale, and risk, comes out at 32.5x. Against that benchmark, the current 17.4x implies a wide gap that screens as undervalued on this framework. Despite recent downgrades and concern around Agentforce adoption, the stock’s P/E still sits well below what this model suggests investors have been willing to pay for similar fundamentals.

On the P/E multiple alone, Salesforce stock currently looks undervalued relative to both its industry and its fair ratio benchmark.

See what the numbers say about this price — find out in our valuation breakdown.

The Salesforce Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where Salesforce’s valuation gap leaves off. They spell out which paths for growth, margins, and earnings would line up with a much higher or lower stock price than today. Each one sets out Salesforce's fair value as a thesis about the business that can be revisited over time, so you can see how well the story holds up as new information comes through.

The Salesforce community is split between a scenario that leans into AI driven upside and one that leans into slower growth and tighter margins.

Bull case: 31% undervalued

"Salesforce's ongoing integration of AI and agent-based automation (Agentforce, Data Cloud) into its product suite is driving rapid adoption, evidenced by 40% of new agentic bookings coming from existing customers expanding usage, and triple-digit growth in Data Cloud and AI ARR. These trends suggest expanding average contract values and a pathway to structurally accelerated revenue growth."

Read the full Bull Case to see why Salesforce could be undervalued

Bear case: 7% overvalued

"The growing maturity of the core CRM and workflow automation market means Salesforce faces obstructed organic growth and greater dependence on expensive, high-risk acquisitions to sustain headline revenue growth, raising the probability of margin dilution and diminishing quality in reported earnings."

Read the full Bear Case to see why Salesforce could be overvalued

Do you think there's more to the story for Salesforce? Head over to our Community to see what others are saying!

The Bottom Line

Salesforce screens as undervalued on market multiples, with a P/E that sits well below both its tailored fair ratio and sector peers. That discount reflects investors weighing AI driven upside against questions about enterprise demand, execution around Agentforce and the impact of recent downgrades. From here, the key question is whether Salesforce can convert its AI investments into durable earnings growth and stable margins. That outcome would make the current valuation look conservative. Alternatively, those risks could prove sticky and keep the stock from re rating meaningfully.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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