Salesforce Stock's Low P/E Valuation: Discount Deal or Growth Trouble?

Salesforce, Inc. CRM is currently trading at an attractive valuation, with its forward 12-month price-to-earnings (P/E) ratio at 23.2, which is lower than the Zacks Computer – Software industry average of 32.8.Image Source: Zacks Investment ResearchCompared to major competitors like Microsoft MSFT, Oracle ORCL and SAP SAP, Salesforce’s stock is cheaper on a P/E basis. At present, Microsoft, Oracle and SAP trade at P/E multiples of 31.92X, 26.53X and 41.78X, respectively.Given Salesforce’s attractive valuation, investors might be wondering: Is this an opportunity to buy, or are there deeper challenges that could keep the stock in check?Salesforce’s Slower Growth Raises Red FlagsSalesforce’s biggest challenge right now is slowing sales growth. For years, the company delivered double-digit revenue increases. However, that pace has now cooled to single digits. In the first quarter of fiscal 2026, revenues rose just 7.7% from a year ago, and non-GAAP earnings per share (EPS) grew by only 5.7%.This slowdown reflects cautious enterprise spending amid economic uncertainty and geopolitical pressures. Analysts anticipate that this trend will persist, with mid-to-high single-digit growth expected for fiscal 2026 and 2027.The impact is also visible in profit forecasts. Salesforce’s EPS is now expected to witness a CAGR of 12.9% over the next five years, a big drop from the 27.8% CAGR it posted over the previous five years.Image Source: Zacks Investment ResearchThis changing growth profile shows how businesses are adjusting their IT budgets. Instead of large digital transformation projects, many are opting for smaller, lower-risk investments. For Salesforce, this means it has to adapt its strategy to stay competitive and relevant.Slower growth has also hurt investor sentiment. Salesforce shares have declined 18.5% year to date, while the industry has risen 9.6%. The stock is also lagging behind key rivals like Microsoft, Oracle and SAP.YTD Price Return PerformanceImage Source: Zacks Investment ResearchNonetheless, Salesforce still leads the global customer relationship management (CRM) software market and holds the biggest market share, according to Gartner. This leadership position gives it a solid base to return to its solid growth trajectory.Salesforce’s Core Business Still Has StrengthDespite the recent slowdown, Salesforce remains the dominant player in the CRM space. Its platform is deeply integrated across enterprise systems, making it a go-to solution for businesses.Salesforce has expanded beyond just CRM through acquisitions like Slack, Own Company and Zoomin. These deals reflect a long-term strategy to grow in areas like collaboration tools, cybersecurity and AI automation.AI is central to Salesforce’s future. Its Einstein GPT product, launched in 2023, now powers generative AI features throughout the platform. These tools help users automate tasks, make better decisions and serve customers more efficiently.Another long-term tailwind is rising global spending on generative AI. Gartner estimates that worldwide generative AI spending will hit $644 billion in 2025, implying a 76.4% year-over-year increase.Enterprise software, a key segment for Salesforce, is expected to grow even faster, with a projected 93.9% increase. Even if economic conditions slow down spending in the short term, digital transformation remains a top priority for businesses, ensuring steady demand for Salesforce’s solutions.Conclusion: Hold Salesforce Stock for NowSalesforce’s slowing growth is real and has weighed on its stock price. However, its leadership in CRM, focus on AI and strategic acquisitions provide reasons to stay invested for the long term.Still, near-term caution is warranted. Until growth picks up or visibility improves, holding onto CRM stock seems like the smartest move.Salesforce carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT): Free Stock Analysis Report Salesforce Inc. (CRM): Free Stock Analysis Report SAP SE (SAP): Free Stock Analysis Report Oracle Corporation (ORCL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks