Stock Analysis on Net
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Salesforce Inc. (NYSE:CRM)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Salesforce Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 20.03%
01 FCFF0 14,619
1 FCFF1 15,385 = 14,619 × (1 + 5.25%) 12,818
2 FCFF2 16,379 = 15,385 × (1 + 6.46%) 11,368
3 FCFF3 17,635 = 16,379 × (1 + 7.67%) 10,197
4 FCFF4 19,201 = 17,635 × (1 + 8.88%) 9,249
5 FCFF5 21,139 = 19,201 × (1 + 10.09%) 8,483
5 Terminal value (TV5) 234,092 = 21,139 × (1 + 10.09%) ÷ (20.03% – 10.09%) 93,940
Intrinsic value of Salesforce Inc. capital 146,054
Less: Debt and finance lease liabilities (fair value) 13,235
Intrinsic value of Salesforce Inc. common stock 132,819
 
Intrinsic value of Salesforce Inc. common stock (per share) $162.17
Current share price $181.50

Based on: 10-K (reporting date: 2026-01-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Salesforce Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 148,649 0.92 21.56%
Debt and finance lease liabilities (fair value) 13,235 0.08 2.90% = 3.46% × (1 – 16.27%)

Based on: 10-K (reporting date: 2026-01-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 819,000,000 × $181.50
= $148,648,500,000.00

   Debt and finance lease liabilities (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (21.50% + 16.70% + 16.40% + 68.48% + 5.74% + 21.00%) ÷ 6
= 16.27%

WACC = 20.03%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Salesforce Inc., PRAT model

Microsoft Excel
Average Jan 31, 2026 Jan 31, 2025 Jan 31, 2024 Jan 31, 2023 Jan 31, 2022 Jan 31, 2021
Selected Financial Data (US$ in millions)
Interest expense 324 272 283 300 221 125
Net income 7,457 6,197 4,136 208 1,444 4,072
 
Effective income tax rate (EITR)1 21.50% 16.70% 16.40% 68.48% 5.74% 21.00%
 
Interest expense, after tax2 254 227 237 95 208 99
Add: Cash dividends and dividend equivalents declared 1,605 1,549 — — — —
Interest expense (after tax) and dividends 1,859 1,776 237 95 208 99
 
EBIT(1 – EITR)3 7,711 6,424 4,373 303 1,652 4,171
 
Finance lease liabilities, current 275 337 372 257 114 35
Debt, current 4,000 — 999 1,182 4 4
Noncurrent debt, excluding current portion 10,439 8,433 8,427 9,419 10,592 2,673
Noncurrent finance lease liabilities 260 341 602 534 271 93
Stockholders’ equity 59,142 61,173 59,646 58,359 58,131 41,493
Total capital 74,116 70,284 70,046 69,751 69,112 44,298
Financial Ratios
Retention rate (RR)4 0.76 0.72 0.95 0.69 0.87 0.98
Return on invested capital (ROIC)5 10.40% 9.14% 6.24% 0.43% 2.39% 9.42%
Averages
RR 0.83
ROIC 6.34%
 
FCFF growth rate (g)6 5.25%

Based on: 10-K (reporting date: 2026-01-31), 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-01-31), 10-K (reporting date: 2023-01-31), 10-K (reporting date: 2022-01-31), 10-K (reporting date: 2021-01-31).

1 See details »

2026 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 324 × (1 – 21.50%)
= 254

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 7,457 + 254
= 7,711

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [7,711 – 1,859] ÷ 7,711
= 0.76

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 7,711 ÷ 74,116
= 10.40%

6 g = RR × ROIC
= 0.83 × 6.34%
= 5.25%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (161,884 × 20.03% – 14,619) ÷ (161,884 + 14,619)
= 10.09%

where:

Total capital, fair value0 = current fair value of Salesforce Inc. debt and equity (US$ in millions)
FCFF0 = the last year Salesforce Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Salesforce Inc. capital

FCFF growth rate (g) forecast

Salesforce Inc., H-model

Microsoft Excel
Year Value gt
1 g1 5.25%
2 g2 6.46%
3 g3 7.67%
4 g4 8.88%
5 and thereafter g5 10.09%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 5.25% + (10.09% – 5.25%) × (2 – 1) ÷ (5 – 1)
= 6.46%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 5.25% + (10.09% – 5.25%) × (3 – 1) ÷ (5 – 1)
= 7.67%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 5.25% + (10.09% – 5.25%) × (4 – 1) ÷ (5 – 1)
= 8.88%