Salesforce, Inc.CRMNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $503.37 per share(market-calibrated)

+156.8%

Upside to Fair Value

Current

$196.05

Pure Model

$522.41

Fair Value

$503.37

Bull Case

$683.09

Bear Case

$387.91

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

0.50%

Calibrated Growth

2.61%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $522.41.

What's Driving This Ratingfor CRM

✓

CapEx already efficient

CapEx at 1.69% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 44.14% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects -0.05% revenue growth, fading to 3.75% by Year 10. Revenue reaches $82.3B (vs $41.5B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $389.91/share (16.7x terminal FCF) while exit multiple gives $654.91/share (35.9x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 325bps below the model's 3.75%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 78.04% indicates efficient cash generation. FCF reaches $34.0B by Year 10 (41.27% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.28

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.24%

Cost of Debt

Pre-tax Cost of Debt2.31%

Tax Rate21.67%

After-tax Cost of Debt1.81%

Equity Weight (E/V)96.51%

Debt Weight (D/V)3.49%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (96.51% × 10.24%) + (3.49% × 1.81%)

= 9.95%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$41.5B	$50.5B	$61.1B	$71.2B	$82.3B
EBIT	$18.3B	$22.3B	$27.0B	$31.4B	$36.3B
Tax	$4.0B	$4.8B	$5.8B	$6.8B	$7.9B
NOPAT	$14.4B	$17.5B	$21.1B	$24.6B	$28.4B
+ Depreciation	$3.6B	$4.4B	$5.3B	$6.2B	$7.2B
- Capex	$700M	$852M	$1.0B	$1.2B	$1.4B
- Δ NWC	-$2M	$438M	$541M	$486M	$297M
Free Cash Flow	$17.3B	$20.6B	$24.9B	$29.2B	$34.0B
Discount Factor	0.910	0.752	0.622	0.515	0.387
Present Value	$15.7B	$15.5B	$15.5B	$15.0B	$13.2B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$34.0B

Terminal Growth Rate3.75%

WACC9.95%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$568.4B

PV of Terminal Value$220.2B

Exit Multiple Method

Year 10 EBITDA$43.5B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$1.2T

PV of Terminal Value$471.9B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$149.6B

PV of Terminal Value$220.2B

Enterprise Value$369.8B

(-) Net Debt-$590M

Equity Value$370.4B

Shares Outstanding950M

Price per Share$389.91

Exit Multiple Method

PV of Projected FCFs$149.6B

PV of Terminal Value$471.9B

Enterprise Value$621.6B

(-) Net Debt-$590M

Equity Value$622.2B

Shares Outstanding950M

Price per Share$654.91

Pure Model Fair Value

$522.41

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
7.95%	$637.54	$655.93	$678.69	$707.62	$745.58
8.95%	$564.01	$575.71	$589.66	$606.58	$627.53
9.95%	$505.35	$513.24	$522.41	$533.19	$546.04
10.95%	$456.86	$462.42	$468.75	$476.03	$484.48
11.95%	$415.80	$419.84	$424.38	$429.51	$435.35

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$387.91

97.9% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.59

Base Case

$522.41

166.5% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.28

Bull Case

$683.09

248.4% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.08

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-0.05%

Year 3 Revenue Growth9.51%

Year 5 Revenue Growth9.71%

Year 7 Revenue Growth7.33%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin44.14%

Tax Rate21.67%

Historical Capex / Rev1.69%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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