Valuation Attraction at 15x Free Cash Flow Amid Caution

4 days ago

"Now if we look at where this business is trading at, it's trading at 15 times cash flow. This is almost a value investment. I've seen articles saying that Salesforce right now is a value stock. Maybe it's not a value investment, but it's getting cheap, guys. I mean, 15 times cash flow for Salesforce is really crazy. It used to trade at 55 times a few years ago and a few months ago it was around 22-25 times. At 15 times, to me this is very interesting. Assuming they hit a 10% revenue growth, the free cash flow yield of around 6% could translate to a 15 to 16% annual return, with potential for a multiple reversion to 18-20 times."

The speaker notes that Salesforce is now trading at an attractive 15 times free cash flow, a significant reduction from previous multiples. Despite his reservations about management, he outlines a scenario where sustained organic growth and potential multiple expansion could deliver substantial annual returns, though he remains cautious due to historical performance issues.

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