Last update on 2024-06-04

Salesforce (CRM) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Detailed Piotroski F-Score analysis for Salesforce (CRM) in 2023. Evaluate financial health on criteria like profitability, liquidity & efficiency.

Short Analysis - Piotroski Score: 4

We're running Salesforce (CRM) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a number between 0 to 9 which reflects a company's financial strength based on 9 criteria related to profitability, liquidity, and operating efficiency. Salesforce (CRM) has been evaluated based on this score. It scored 1 point each for positive net income, positive cash flow from operations, and operating cash flow being higher than net income. However, it lost points for declining ROA, increasing leverage, decreasing current ratio, increased shares outstanding, decreasing gross margin, and reduced asset turnover ratio. Therefore, its total Piotroski F-Score is 4, indicating a few financial strengths but significant areas of concern.

Insights for Value Investors Seeking Stable Income

Salesforce (CRM) has areas of financial strength but also shows multiple signs of declining efficiency compared to both its historical performance and industry standards. With a Piotroski F-Score of 4, it suggests that while there are positive aspects like strong operating cash flow, there are worrisome trends in ROA, leverage, liquidity, share dilution, gross margin, and asset turnover. Potential investors should be cautious and conduct more detailed research before considering investment in Salesforce, especially comparing with other firms and industry benchmarks.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Salesforce (CRM)

Company has a positive net income?

The criterion checks whether the company has a positive net income, reflecting profitability. A positive net income indicates the company's ability to generate profit, suggesting financial health.

Salesforce’s net income for 2023 stands at $208 million, which is a positive value. Historically, Salesforce's net income has fluctuated, recording negative figures in some years. However, 2023 marks a continuation from the positive trend observed since 2017, indicating a robust performance. A net positive income over consecutive years suggests improved operational efficiency and profitability. Therefore, Salesforce scores 1 point for this criterion, signifying good financial health.

Company has a positive cash flow?

Criterion: Check if Cash Flow from Operations (CFO) is positive or negative. Importance: A positive CFO indicates that the company is generating sufficient cash from its core business operations to cover expenses and undertake new investments.

For Salesforce (CRM), the cash flow from operations in 2023 stands at $7,111,000,000, which is indeed positive. Hence, Salesforce scores 1 point for this criterion. Examining the historical trend, Salesforce has demonstrated strong and consistent growth in CFO over the last 20 years, starting from $5,213,000 in 2003 and steadily climbing to $7,111,000,000 in 2023. This consistent upward trajectory suggests robustness in its core operations and capability in generating ample internal cash flow, which is a positive indicator of financial health.

Return on Assets (ROA) are growing?

ROA, or Return on Assets, is a measure of a company's profitability in relation to its total assets. It is essential in assessing how efficiently a company is using its assets to generate earnings.

Comparing Salesforce's ROA of 0.0021 in 2023 to the ROA of 0.0179 in 2022 shows a decrease. Thus, Salesforce's ROA score according to Piotroski's criterion is 0. Despite a significant cash flow from operations, efficiency appears to have declined. This negative trend is exacerbated when compared to the industry median ROA, which was 0.6741 in 2023, indicating a substantial gap between Salesforce and the industry standard.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is an indicator of financial health and efficiency.

Salesforce (CRM) reported an Operating Cash Flow of $7.111 billion and a Net Income of $208 million for the year 2023. This results in an Operating Cash Flow that is markedly higher than Net Income. When operating cash flow is significantly higher than net income, it indicates that the company is efficiently converting its accounting profits into cash, which is a positive trend. Specifically, Salesforce's operating cash flow is approximately 34 times its net income for 2023. With consistent growth in operating cash flow over the last 20 years, this trend suggests strong operational efficiency. Therefore, 1 point is added for this criterion.

Liquidity of Salesforce (CRM)

Leverage is declining?

Change in leverage assesses a company's use of debt to finance assets and operations. Decreased leverage indicates a reduction in financial risk.

Salesforce's leverage has increased from 0.1246 in 2022 to 0.1396 in 2023. Thus, for the Piotroski F-Score, Salesforce receives 0 points for this criterion. Over the last 20 years, Salesforce's leverage ratio has shown fluctuations, peaking at 0.183 in 2010 and experiencing lows such as '0' in multiple instances, evidencing a dynamic capital structure. The recent increase indicates Salesforce has taken on more debt relative to its equity in 2023, which could be a concern for liquidity and risk management.

Current Ratio is growing?

Current ratio gauges a company's ability to pay short-term obligations with its short-term assets.

The Current Ratio for Salesforce decreased from 1.0487 in 2022 to 1.0195 in 2023. This indicates a slight reduction in its ability to cover short-term liabilities using short-term assets. The decline suggests potential liquidity issues or a tighter working capital situation. Over the last 20 years, Salesforce has seen fluctuating trends in current ratios, dropping significantly during some periods, like 2011 (0.8421) and 2012 (0.7197). In contrast, the industry median Current Ratio has consistently stayed above 1.4, highlighting that Salesforce lags behind the industry average. For 2023, the industry median stands at 1.7519, while Salesforce's ratio of 1.0195 underscores its relatively weaker liquidity position compared to peers. Therefore, this metric warrants a score of 0 for the Piotroski analysis as there has been a decrease.

Number of shares not diluted?

The change in shares outstanding criterion looks at whether the company is reducing its total number of shares in circulation. A decrease in outstanding shares can indicate that the company is buying back shares, often a positive signal for investors.

In comparing the outstanding shares of Salesforce (CRM) over the last two years, we observe an increase from 955,000,000 shares in 2022 to 992,000,000 shares in 2023. This rise of 37,000,000 shares signifies a 3.87% increase year-over-year. Consequently, this does not fulfill the criteria for a point, as a reduction in outstanding shares was not achieved. A historical analysis shows a steady rise over the past two decades, from 105,500,000 shares in 2003 to the current level. The general trend of increasing shares might suggest the issuance of new shares, potentially diluting existing shareholder value. Therefore, no point is awarded here.

Operating of Salesforce (CRM)

Cross Margin is growing?

The criterion examines a company's Gross Margin over the previous year. Gross Margin is crucial as it indicates how efficiently a company utilizes its resources to produce goods and services. Enhancing Gross Margin means a company is retaining more revenue per dollar of sales.

In 2023, Salesforce reported a Gross Margin of 0.7334, a slight decrease from 0.7348 in 2022. While this reduction might seem negligible, especially given a strong historical performance that often surpassed the industry median, it signals potential cost management slips or input cost increases. Historically, Salesforce had a Gross Margin significantly higher than the industry median, suggesting robust pricing power and operational efficiency. However, in 2023, the Gross Margin not only declined but also remained only slightly above the industry's 0.6741, hinting that it’s still competitively advantageous but not at Salesforce's usual levels. As a result, Salesforce will score 0 points for this criterion.

Asset Turnover Ratio is growing?

The Change in Asset Turnover assesses the efficiency of a company in generating sales from its assets over two consecutive periods.

The Asset Turnover for Salesforce (CRM) in 2023 is 0.3231, which has decreased slightly from 0.3281 in 2022. This slight decline indicates a small reduction in efficiency in using its assets to generate sales, reflecting a 0.0051 drop in the ratio year over year. Historically, the company's asset turnover ratio has been on a declining trend over the past two decades, falling sharply from 1.4698 in 2003 to the current levels, signaling diminishing efficacy in asset utilization. Therefore, no point is awarded based on this criterion, reflecting the reduced asset productivity.