Salesforce (CRM) Stock May Be 49% Undervalued On Its $1.6B VA Deal

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Salesforce stock has rebounded in recent weeks after a challenging start to the year, and valuation tools now suggest the market price may sit well below an intrinsic value estimate based on a Discounted Cash Flow (DCF) model.

Year to date, Salesforce shares are down 27.4%, which means the recent bounce has not yet erased the earlier decline. The recent US$1.6b contract with the Department of Veterans Affairs can support long term cash flow expectations, while competitive pressure on Slack from new platforms such as Buzz may weigh on those same expectations. On Simply Wall St's checks, Salesforce screens as undervalued in 5 of 6 valuation measures. This points to a share price that leans cheap across several methods.

The issue now is whether Salesforce's current share price still offers a meaningful discount to its intrinsic value estimate or whether the recent gains have already captured most of that gap.

Find out why Salesforce's -26.0% return over the last year is lagging behind its peers.

Is Salesforce a Bargain on Cash Flow?

The Discounted Cash Flow (DCF) model estimates what Salesforce could be worth based on its future cash generation. Salesforce has latest twelve month free cash flow of about US$14.5b, and the model assumes those cash flows continue growing rather than shrinking.

On that basis, the DCF points to an intrinsic value of about $362 per share. Compared with the current market price, that implies the stock trades at roughly a 49.1% discount on this cash flow view. The recent US$1.6b Veterans Affairs contract is a concrete data point that helps explain why projected cash flows stay robust in the model, even as new competition for Slack adds uncertainty around collaboration products.

Overall, the DCF work suggests Salesforce stock appears undervalued relative to the cash flows that are currently built into this model.

Our Discounted Cash Flow (DCF) analysis suggests Salesforce is undervalued by 49.1%. Track this in your watchlist or portfolio, or discover 56 more high quality undervalued stocks.CRM Discounted Cash Flow as at Jul 2026

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Salesforce.

Is Salesforce Still Cheap on Earnings?

The P/E ratio is a useful way to compare what you pay today for each dollar of Salesforce earnings versus similar software stocks. Salesforce currently trades on a P/E of about 18.8x, which sits below the broader Software industry average of roughly 28.8x and the peer group average near 33.6x.

Story Continues

A tailored fair P/E for Salesforce, which takes into account its scale, margins, sector profile and risk, is estimated at about 33.0x. This is higher than the current 18.8x multiple. The difference suggests the stock price may not fully reflect the earnings power that is implied by this framework.

On the P/E multiple alone, Salesforce stock appears undervalued compared with both its industry and the fair ratio implied by these checks.NYSE:CRM P/E Ratio as at Jul 2026

See what the numbers say about this price — find out in our valuation breakdown.

The Salesforce Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where the valuation work on Salesforce leaves off. Each Narrative sets out what would need to happen to Salesforce's growth, margins and earnings for the stock to be worth meaningfully more or less than today's price, and they live on Simply Wall St's Community page. Rather than a single multiple or model output, each one lays out the assumptions behind its fair value so you can compare them with actual results over time.

Community views on Salesforce are split, with one camp focused on AI driven upside and another worried about slower growth and margin pressure.

Bull case: 24% undervalued

"Salesforce's ongoing integration of AI and agent-based automation (Agentforce, Data Cloud) into its product suite is driving rapid adoption, evidenced by 40% of new agentic bookings coming from existing customers expanding usage, and triple-digit growth in Data Cloud and AI ARR; these trends suggest expanding average contract values and a pathway to structurally accelerated revenue growth."

Read the full Bull Case to see why Salesforce could be undervalued

Bear case: 15% overvalued

"Regulatory tightening on data privacy worldwide threatens Salesforce's ability to leverage and monetize customer data across its agentic enterprise platforms, forcing increased compliance investments and potentially stifling adoption of key offerings, which would depress long-term revenue growth and increase operational costs, leading to reduced net margins."

Read the full Bear Case to see why Salesforce could be overvalued

Do you think there's more to the story for Salesforce? Head over to our Community to see what others are saying!

The Bottom Line

For Salesforce, both the Discounted Cash Flow (DCF) intrinsic value estimate and the market multiple work point to an undervalued stock, rather than a clear value trap. The key question is whether cash flows and margins can track the assumptions behind that intrinsic value, especially as AI products scale and competition around Slack and data privacy risks stay in focus. The real swing factor from here is whether Salesforce converts its product roadmap and large contracts into durable cash generation that eventually justifies a higher earnings multiple.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include CRM.

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