"We believe the company has several attributes that should appeal to investors, which are: great historical long-term top-line growth, expanding market opportunity to help continue that growth, highly rated products, and a large ecosystem of customers and partners," Drexel Hamilton said.
However, free cash flow growth that lags revenue growth leads analysts to remain cautious.
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For F2015, Drexel Hamilton expects the California-based cloud computing and social enterprise solutions company to report revenue of $5.37 billion, up 31.9% year-over-year versus consensus of $5.37 billion and non-GAAP operating income of $561.1 million versus consensus of $566.9 million.
Separately, TheStreet Ratings team rates SALESFORCE.COM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate SALESFORCE.COM INC (CRM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in stock price during the past year and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CRM's revenue growth has slightly outpaced the industry average of 26.3%. Since the same quarter one year prior, revenues rose by 28.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The gross profit margin for SALESFORCE.COM INC is currently very high, coming in at 82.75%. Regardless of CRM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CRM's net profit margin of -2.81% significantly underperformed when compared to the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Software industry and the overall market, SALESFORCE.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has decreased to $122.51 million or 11.13% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- You can view the full analysis from the report here: CRM Ratings Report