Hot off an IPO launch, Workday has a market cap of $8.1 billion yet has no earnings and sales more typical of small cap stocks. Next to Workday, Salesforce appears conservatively valued.
Get a load of this:
Despite Salesforce having sales that are twelve times as large as Workday, Salesforce's market cap is only two-and-a-half times Workday's. What makes Workday get a higher valuation than Salesforce?
Then it hit me. Workday might be a younger version of Salesforce. Workday has supercharged revenue growth reminiscent of an earlier Salesforce.
So I checked out "baby" Salesforce back in 2004 when it had a very similar yearly revenue of $176 million and a steaming 85% revenue growth. The 2004 Salesforce was the spitting image of Workday. So, how did the market value the growth rocket 2004 Salesforce? Back then, Salesforce "only" had a P/S of 12 - 13 with a P/CF of 86 and a much humbler $2 billion market cap.
Compared to Workday, Salesforce - young or old - is a steal.
Talking about steal, Workday's financial results are due November 28. With its sky-high valuation, even a minor disappointment might send shares plummeting. This stock just might plunder your investment portfolio.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.