NEW YORK (The Street) -- With better-than-expected results coming in from Salesforce.com (CRM), there appears to be no slowing down in the fast-growing cloud and Big Data solutions markets. Although Splunk (SPLK), whose shares are up 16% year to date, has been a beneficiary of strong cloud demand, there's nothing about the stock today that screams value.
At around $68 a share, Splunk's price-to-earnings ratio is 766 factoring in Splunk's 9 cent-a-share earnings in its last fiscal year. That P/E is 36 times the average earnings multiple of companies in the S&P 500 (SPX) index. And even when compared with the more expensive iShares North American Tech-Software ETF (IGV), which has an average P/E of 30, Splunk stock still trades 25 times higher.
Plus, when considering the tech-software ETF houses leading cloud stocks like Oracle (ORCL) and Red Hat (RHT) in addition to Salesforce.com, investors paying such a high valuation for Splunk today are foregoing better gains and safer picks elsewhere.
So while Splunk stock has impressed with more than 150% gains in three years, including 16% this year, the easy money on the stock has already been made.
Ahead of the company's fiscal first-quarter earnings results Thursday, the smart play would be to take some of these profits off the table and wait to hear what the company says about its outlook for the rest of the year and beyond.