Is Salesforce, Inc. overvalued or undervalued?

As of 14 November 2024, Salesforce, Inc. has moved from a valuation grade of very expensive to expensive. The company is currently considered overvalued based on its key financial ratios. The P/E ratio stands at 38, while the industry average P/E is approximately 36.69. Additionally, Salesforce has an EV to EBITDA ratio of 19.62, which is lower than Microsoft Corp.'s 23.27 but higher than Adobe Inc.'s 24.12, indicating a premium valuation compared to some peers.
In terms of profitability, Salesforce's ROCE is 15.09% and ROE is 11.29%, which are respectable but do not justify its current valuation levels. The PEG ratio of 2.14 suggests that the stock may be overvalued relative to its growth prospects. Recent stock performance shows that Salesforce has underperformed against the S&P 500, particularly year-to-date, where it has declined by 21.21% compared to the S&P's 2.44% gain, reinforcing the notion that the stock is overvalued.