Is Salesforce (NYSE:
) worth the going rate of $168 per share? Many investors have
already answered that question by investing in the stock. Bob Auer,
the Senior Portfolio Manager of SBAuer Funds, LLC, is not one of
those investors. Before he is willing to buy a company, it must
meet the following three characteristics:
"They had to have reported a quarter with 25 percent up earnings
year-over-year." "Sales had to be up 20 percent year-over-year."
"They had to be at below a 12 P/E."
Auer has examined Salesforce numerous times but it has yet to
inspire him to take action.
"My favorite stock to hate that we've never owned is
Salesforce.com," Auer told Benzinga. "It's a real head-scratcher to
me. We're value investors and I don't get the thesis of it."
Salesforce currently trades at roughly 8.1 times sales and 10.66
times book value.
"We don't buy anything over 12 times profit, so even if you had
eight times sales and no employees and no vendors to pay and it all
went to the bottom line…" said Auer. "So let's say you took in a
billion and your gross profit was a billion, then even after tax,
you'd be down. So at eight times sales, it would just barely make
"It's got a $24 billion market cap. Total revenue is gonna be
$3.8 billion on $24 billion market cap. The estimate from 42
analysts is $1.97 [per share]. I'm willing to go $1.97 times 12 --
that's a $23 stock to me, [but] it's hanging at [more than
Auer compared Salesforce's forward P/E to Cisco (NASDAQ:
), which was once above $80 but has dropped to roughly $10.
"I'm not saying that Salesforce will eventually go to a $10 P/E,
but I think that anyone who buys the stock at this level and
doesn't pay any attention [is making a mistake]," Auer warned. "You
might say, 'Well, P/E is for simpletons.' What about
price-to-sales, price-to-book, price-to-cash-flow? Any other
metric? Dividend yield is zero with a zero yield. Their trailing 12
months earnings is minus $1.90 EPS.
"I just don't get it. I just don't get what the thesis is
While Salesforce may never win Auer's vote, he has become a big
fan of OmniVision (NASDAQ:
"We've been in and out of that a few times over the last several
years," he said. "They make the camera modules and sensors for
tablets and smartphones."
Auer referred to OmniVision as the "Cadillac or Rolls Royce" of
the camera world.
) is probably their biggest competitor," he added. "But OmniVision
is a pure play, and they have a new camera that's going in Google's
) Nexus 5. It's going to be a 13 [Megapixel] camera module that
does 4K video. For a little module in your smartphone to be able to
record video at 4K, it's just amazing technology."
Auer thinks that the camera will be a huge selling point for the
Nexus 5. He is also quite pleased with OmniVision's EPS
"It's estimated to make $1.30 EPS this year, $1.55 next year and
$1.70 the following year," he said. "It's starting to have that
growth that we needed."
Louis Bedigian is the Senior Tech Analyst and Features Writer of
Benzinga. You can reach him at 248-636-1322 or
email@example.com. Follow him
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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