Intrinsic value of Salesforce.com - CRM

Previous Close

$111.77

  Intrinsic Value

$86.51

stock screener

  Rating & Target

sell

-23%

Previous close

$111.77

 
Intrinsic value

$86.51

 
Up/down potential

-23%

 
Rating

sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CRM stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  25.87
  24.90
  22.91
  21.12
  19.51
  18.06
  16.75
  15.58
  14.52
  13.57
  12.71
  11.94
  11.24
  10.62
  10.06
  9.55
  9.10
  8.69
  8.32
  7.99
  7.69
  7.42
  7.18
  6.96
  6.76
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
Revenue, $m
  8,392
  10,482
  12,883
  15,604
  18,648
  22,015
  25,702
  29,705
  34,018
  38,633
  43,543
  48,742
  54,223
  59,981
  66,015
  72,321
  78,900
  85,754
  92,888
  100,307
  108,018
  116,033
  124,361
  133,016
  142,013
  151,368
  161,099
  171,225
  181,768
  192,749
  204,193
Variable operating expenses, $m
 
  10,123
  12,275
  14,714
  17,443
  20,461
  23,767
  27,356
  31,222
  35,359
  39,760
  43,694
  48,608
  53,770
  59,178
  64,831
  70,729
  76,874
  83,268
  89,919
  96,832
  104,017
  111,482
  119,241
  127,306
  135,692
  144,415
  153,493
  162,944
  172,788
  183,047
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  8,330
  10,123
  12,275
  14,714
  17,443
  20,461
  23,767
  27,356
  31,222
  35,359
  39,760
  43,694
  48,608
  53,770
  59,178
  64,831
  70,729
  76,874
  83,268
  89,919
  96,832
  104,017
  111,482
  119,241
  127,306
  135,692
  144,415
  153,493
  162,944
  172,788
  183,047
Operating income, $m
  62
  359
  608
  889
  1,205
  1,553
  1,935
  2,350
  2,796
  3,274
  3,783
  5,048
  5,615
  6,212
  6,836
  7,489
  8,171
  8,881
  9,619
  10,388
  11,186
  12,016
  12,879
  13,775
  14,707
  15,675
  16,683
  17,732
  18,824
  19,961
  21,146
EBITDA, $m
  694
  1,346
  1,654
  2,003
  2,394
  2,826
  3,299
  3,813
  4,367
  4,959
  5,590
  6,257
  6,960
  7,700
  8,474
  9,284
  10,128
  11,008
  11,924
  12,876
  13,866
  14,895
  15,964
  17,075
  18,230
  19,431
  20,680
  21,980
  23,333
  24,743
  26,212
Interest expense (income), $m
  55
  94
  182
  283
  397
  525
  666
  821
  989
  1,170
  1,364
  1,570
  1,788
  2,019
  2,260
  2,514
  2,778
  3,055
  3,342
  3,642
  3,953
  4,277
  4,614
  4,963
  5,327
  5,705
  6,097
  6,506
  6,931
  7,374
  7,835
Earnings before tax, $m
  25
  265
  426
  607
  808
  1,029
  1,269
  1,529
  1,807
  2,104
  2,419
  3,478
  3,827
  4,193
  4,576
  4,976
  5,392
  5,826
  6,277
  6,746
  7,233
  7,739
  8,265
  8,812
  9,380
  9,971
  10,586
  11,226
  11,892
  12,587
  13,311
Tax expense, $m
  -155
  72
  115
  164
  218
  278
  343
  413
  488
  568
  653
  939
  1,033
  1,132
  1,236
  1,343
  1,456
  1,573
  1,695
  1,821
  1,953
  2,090
  2,232
  2,379
  2,533
  2,692
  2,858
  3,031
  3,211
  3,398
  3,594
Net income, $m
  180
  193
  311
  443
  590
  751
  926
  1,116
  1,319
  1,536
  1,766
  2,539
  2,794
  3,061
  3,341
  3,632
  3,936
  4,253
  4,582
  4,924
  5,280
  5,649
  6,033
  6,432
  6,847
  7,279
  7,728
  8,195
  8,682
  9,189
  9,717

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,209
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  17,585
  19,197
  23,595
  28,578
  34,153
  40,320
  47,074
  54,406
  62,304
  70,757
  79,750
  89,271
  99,309
  109,856
  120,906
  132,455
  144,505
  157,059
  170,124
  183,712
  197,836
  212,514
  227,767
  243,619
  260,097
  277,230
  295,052
  313,599
  332,908
  353,020
  373,980
Adjusted assets (=assets-cash), $m
  15,376
  19,197
  23,595
  28,578
  34,153
  40,320
  47,074
  54,406
  62,304
  70,757
  79,750
  89,271
  99,309
  109,856
  120,906
  132,455
  144,505
  157,059
  170,124
  183,712
  197,836
  212,514
  227,767
  243,619
  260,097
  277,230
  295,052
  313,599
  332,908
  353,020
  373,980
Revenue / Adjusted assets
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
  0.546
Average production assets, $m
  2,726
  3,407
  4,187
  5,071
  6,060
  7,155
  8,353
  9,654
  11,056
  12,556
  14,152
  15,841
  17,622
  19,494
  21,455
  23,504
  25,642
  27,870
  30,189
  32,600
  35,106
  37,711
  40,417
  43,230
  46,154
  49,195
  52,357
  55,648
  59,074
  62,643
  66,363
Working capital, $m
  -1,298
  -4,360
  -5,359
  -6,491
  -7,757
  -9,158
  -10,692
  -12,357
  -14,152
  -16,071
  -18,114
  -20,277
  -22,557
  -24,952
  -27,462
  -30,085
  -32,822
  -35,674
  -38,641
  -41,728
  -44,936
  -48,270
  -51,734
  -55,335
  -59,077
  -62,969
  -67,017
  -71,230
  -75,615
  -80,184
  -84,944
Total debt, $m
  2,710
  5,199
  8,080
  11,344
  14,995
  19,034
  23,458
  28,261
  33,434
  38,971
  44,861
  51,097
  57,672
  64,581
  71,818
  79,383
  87,276
  95,499
  104,056
  112,956
  122,208
  131,822
  141,813
  152,196
  162,988
  174,211
  185,884
  198,032
  210,679
  223,853
  237,582
Total liabilities, $m
  10,085
  12,574
  15,455
  18,719
  22,370
  26,409
  30,833
  35,636
  40,809
  46,346
  52,236
  58,472
  65,047
  71,956
  79,193
  86,758
  94,651
  102,874
  111,431
  120,331
  129,583
  139,197
  149,188
  159,571
  170,363
  181,586
  193,259
  205,407
  218,054
  231,228
  244,957
Total equity, $m
  7,500
  6,623
  8,140
  9,859
  11,783
  13,910
  16,240
  18,770
  21,495
  24,411
  27,514
  30,798
  34,262
  37,900
  41,712
  45,697
  49,854
  54,185
  58,693
  63,381
  68,253
  73,317
  78,580
  84,049
  89,733
  95,644
  101,793
  108,192
  114,853
  121,792
  129,023
Total liabilities and equity, $m
  17,585
  19,197
  23,595
  28,578
  34,153
  40,319
  47,073
  54,406
  62,304
  70,757
  79,750
  89,270
  99,309
  109,856
  120,905
  132,455
  144,505
  157,059
  170,124
  183,712
  197,836
  212,514
  227,768
  243,620
  260,096
  277,230
  295,052
  313,599
  332,907
  353,020
  373,980
Debt-to-equity ratio
  0.361
  0.790
  0.990
  1.150
  1.270
  1.370
  1.440
  1.510
  1.560
  1.600
  1.630
  1.660
  1.680
  1.700
  1.720
  1.740
  1.750
  1.760
  1.770
  1.780
  1.790
  1.800
  1.800
  1.810
  1.820
  1.820
  1.830
  1.830
  1.830
  1.840
  1.840
Adjusted equity ratio
  0.344
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345
  0.345

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  180
  193
  311
  443
  590
  751
  926
  1,116
  1,319
  1,536
  1,766
  2,539
  2,794
  3,061
  3,341
  3,632
  3,936
  4,253
  4,582
  4,924
  5,280
  5,649
  6,033
  6,432
  6,847
  7,279
  7,728
  8,195
  8,682
  9,189
  9,717
Depreciation, amort., depletion, $m
  632
  986
  1,046
  1,114
  1,189
  1,273
  1,364
  1,463
  1,570
  1,685
  1,807
  1,209
  1,345
  1,488
  1,638
  1,794
  1,957
  2,127
  2,304
  2,489
  2,680
  2,879
  3,085
  3,300
  3,523
  3,755
  3,997
  4,248
  4,509
  4,782
  5,066
Funds from operations, $m
  2,304
  1,180
  1,357
  1,556
  1,779
  2,023
  2,290
  2,579
  2,890
  3,221
  3,572
  3,748
  4,139
  4,549
  4,978
  5,427
  5,894
  6,380
  6,887
  7,413
  7,960
  8,528
  9,119
  9,732
  10,370
  11,034
  11,724
  12,443
  13,191
  13,970
  14,783
Change in working capital, $m
  142
  -869
  -999
  -1,132
  -1,266
  -1,401
  -1,534
  -1,665
  -1,794
  -1,920
  -2,043
  -2,163
  -2,280
  -2,396
  -2,510
  -2,623
  -2,737
  -2,851
  -2,968
  -3,086
  -3,208
  -3,334
  -3,465
  -3,601
  -3,743
  -3,892
  -4,048
  -4,213
  -4,386
  -4,568
  -4,761
Cash from operations, $m
  2,162
  2,049
  2,356
  2,688
  3,045
  3,424
  3,825
  4,245
  4,684
  5,141
  5,615
  5,910
  6,419
  6,945
  7,488
  8,050
  8,631
  9,232
  9,854
  10,499
  11,168
  11,862
  12,583
  13,333
  14,113
  14,926
  15,772
  16,655
  17,577
  18,539
  19,544
Maintenance CAPEX, $m
  0
  -208
  -260
  -320
  -387
  -463
  -546
  -638
  -737
  -844
  -958
  -1,080
  -1,209
  -1,345
  -1,488
  -1,638
  -1,794
  -1,957
  -2,127
  -2,304
  -2,489
  -2,680
  -2,879
  -3,085
  -3,300
  -3,523
  -3,755
  -3,997
  -4,248
  -4,509
  -4,782
New CAPEX, $m
  -464
  -681
  -780
  -884
  -989
  -1,094
  -1,198
  -1,301
  -1,402
  -1,500
  -1,596
  -1,690
  -1,781
  -1,872
  -1,961
  -2,049
  -2,138
  -2,228
  -2,318
  -2,411
  -2,506
  -2,605
  -2,707
  -2,813
  -2,924
  -3,040
  -3,163
  -3,291
  -3,426
  -3,569
  -3,719
Cash from investing activities, $m
  -2,684
  -889
  -1,040
  -1,204
  -1,376
  -1,557
  -1,744
  -1,939
  -2,139
  -2,344
  -2,554
  -2,770
  -2,990
  -3,217
  -3,449
  -3,687
  -3,932
  -4,185
  -4,445
  -4,715
  -4,995
  -5,285
  -5,586
  -5,898
  -6,224
  -6,563
  -6,918
  -7,288
  -7,674
  -8,078
  -8,501
Free cash flow, $m
  -522
  1,160
  1,315
  1,484
  1,669
  1,867
  2,080
  2,306
  2,545
  2,797
  3,061
  3,141
  3,428
  3,728
  4,039
  4,363
  4,698
  5,047
  5,408
  5,783
  6,173
  6,578
  6,998
  7,435
  7,889
  8,362
  8,855
  9,368
  9,902
  10,460
  11,042
Issuance/(repayment) of debt, $m
  596
  2,509
  2,881
  3,264
  3,651
  4,039
  4,424
  4,802
  5,174
  5,536
  5,890
  6,236
  6,575
  6,908
  7,238
  7,565
  7,893
  8,223
  8,558
  8,900
  9,251
  9,614
  9,991
  10,383
  10,793
  11,222
  11,673
  12,148
  12,647
  13,174
  13,729
Issuance/(repurchase) of shares, $m
  401
  1,119
  1,207
  1,276
  1,334
  1,377
  1,404
  1,414
  1,406
  1,380
  1,337
  746
  670
  578
  472
  352
  221
  78
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  998
  3,628
  4,088
  4,540
  4,985
  5,416
  5,828
  6,216
  6,580
  6,916
  7,227
  6,982
  7,245
  7,486
  7,710
  7,917
  8,114
  8,301
  8,558
  8,900
  9,251
  9,614
  9,991
  10,383
  10,793
  11,222
  11,673
  12,148
  12,647
  13,174
  13,729
Total cash flow (excl. dividends), $m
  448
  4,788
  5,403
  6,025
  6,654
  7,283
  7,907
  8,522
  9,125
  9,713
  10,288
  10,123
  10,673
  11,214
  11,748
  12,280
  12,812
  13,348
  13,966
  14,683
  15,424
  16,192
  16,989
  17,818
  18,682
  19,585
  20,528
  21,515
  22,550
  23,634
  24,771
Retained Cash Flow (-), $m
  -2,497
  -1,312
  -1,517
  -1,719
  -1,923
  -2,128
  -2,330
  -2,530
  -2,725
  -2,916
  -3,103
  -3,285
  -3,463
  -3,639
  -3,812
  -3,985
  -4,157
  -4,331
  -4,508
  -4,688
  -4,873
  -5,064
  -5,262
  -5,469
  -5,685
  -5,911
  -6,149
  -6,398
  -6,662
  -6,939
  -7,231
Prev. year cash balance distribution, $m
 
  2,189
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  5,665
  3,885
  4,305
  4,730
  5,156
  5,577
  5,993
  6,399
  6,797
  7,185
  6,838
  7,210
  7,575
  7,936
  8,295
  8,655
  9,017
  9,459
  9,996
  10,551
  11,128
  11,726
  12,349
  12,997
  13,673
  14,379
  15,117
  15,888
  16,695
  17,540
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  5,431
  3,557
  3,747
  3,895
  3,996
  4,048
  4,048
  4,000
  3,905
  3,767
  3,247
  3,077
  2,880
  2,664
  2,435
  2,199
  1,962
  1,742
  1,539
  1,341
  1,151
  973
  809
  662
  532
  420
  324
  246
  182
  132
Current shareholders' claim on cash, %
  100
  97.9
  96.2
  94.7
  93.4
  92.4
  91.4
  90.6
  90.0
  89.4
  88.9
  88.7
  88.5
  88.3
  88.2
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1
  88.1

Salesforce.com, Inc. is a provider of enterprise software, delivered through the cloud, with a focus on customer relationship management (CRM). The Company focuses on cloud, mobile, social, Internet of Things (IoT) and artificial intelligence technologies. The Company's service offerings are configured and integrated with other platforms and enterprise applications. The Company delivers its service offerings via Internet browsers and on mobile devices. Its Customer Success Platform is a portfolio of service offerings providing sales force automation, customer service and support, marketing automation, digital commerce, community management, analytics, application development, IoT integration, collaborative productivity tools and its professional cloud services. Its cloud service offerings include Sales Cloud, Service Cloud, Marketing Cloud, Commerce Cloud, Community Cloud, Analytics Cloud, Salesforce Quip and Salesforce Platform.

FINANCIAL RATIOS  of  Salesforce.com (CRM)

Valuation Ratios
P/E Ratio 439.3
Price to Sales 9.4
Price to Book 10.5
Price to Tangible Book
Price to Cash Flow 36.6
Price to Free Cash Flow 46.6
Growth Rates
Sales Growth Rate 25.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -34.6%
Cap. Spend. - 3 Yr. Gr. Rate 9.2%
Financial Strength
Quick Ratio 110
Current Ratio 0
LT Debt to Equity 35.9%
Total Debt to Equity 36.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 0.3%
Return On Total Capital 2.1%
Ret/ On T. Cap. - 3 Yr. Avg. -1%
Return On Equity 2.9%
Return On Equity - 3 Yr. Avg. -1.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 73.4%
Gross Margin - 3 Yr. Avg. 74.9%
EBITDA Margin 8.5%
EBITDA Margin - 3 Yr. Avg. 7.6%
Operating Margin 0.7%
Oper. Margin - 3 Yr. Avg. -0.1%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. -0.9%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. -1.2%
Effective Tax Rate -620%
Eff/ Tax Rate - 3 Yr. Avg. -156.7%
Payout Ratio 0%

CRM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRM stock intrinsic value calculation we used $8392 million for the last fiscal year's total revenue generated by Salesforce.com. The default revenue input number comes from 2017 income statement of Salesforce.com. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CRM stock valuation model: a) initial revenue growth rate of 24.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CRM is calculated based on our internal credit rating of Salesforce.com, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Salesforce.com.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CRM stock the variable cost ratio is equal to 98.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CRM stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Salesforce.com.

Corporate tax rate of 27% is the nominal tax rate for Salesforce.com. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CRM stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CRM are equal to 32.5%.

Life of production assets of 13.1 years is the average useful life of capital assets used in Salesforce.com operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CRM is equal to -41.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $7500 million for Salesforce.com - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 726.303 million for Salesforce.com is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Salesforce.com at the current share price and the inputted number of shares is $81.2 billion.

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Financial statements of CRM
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