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When it comes to P/E, Green Mountain Coffee Roasters (GMCR) (102) and Salesforce.com (CRM) (611) are in nosebleed territory. Coincidentally, both companies have $15 billion market caps. Green Mountain Coffee Roasters makes the Keurig single-cup brewing system. Salesforce.com is a provider of enterprise cloud computing applications.

Do they deserve these sky high P/Es? No company can remain at lofty 100+ P/Es forever. Eventually, they all must fall to Earth. They must earn those elevated valuations. Investors are willing to "pay up" as long as the companies tell an amazing story in at least one of the measures: revenue, earnings, cash flow. What are those stories?

Companies with high P/

Es often demonstrate accelerated revenue growth (ARG). How do the two stack up on year over year revenue growth? Data is courtesy of Morningstar. 2011 is 6 month comparison to analogous period 2010.

Green Mountain Coffee Roasters has ARG. In contrast, Salesforce.com's revenue growth has been decelerating for most of the last decade. Salesforce.com revenue growth has been starting to accelerate, although it is below Green Mountain Coffee Roasters' strong performance. Salesforce.com has a subscription based model -- some of its revenue is deferred over a 2 to 5 year period, hiding some of its sales. Salesforce.com reported $935 million in deferred revenue, an increase of 37% over last year, a rate in keeping with its overall revenue growth. Good, but not in the same ball park as Green Mountain Coffee Roasters. Chalk one up for Green Mountain Coffee Roasters.

Next up, EPS growth rate year over year. Are profits growing?

Green Mountain Coffee Roasters has seen strong EPS growth. Salesforce.com has just the opposite. Salesforce.com has yet to translate its revenue into consistent earnings. Green Mountain Coffee Roasters wins this contest.

How Have the 2 Companies' P/Es Been Over the Decade?

Green Mountain Coffee Roasters has had a more measured rise in P/E over the last 8 years (who ever thought a P/E over 100 could be considered measured). Salesforce.com has spent most of the 8 years over 200. It's near impossible to stay in the P/E stratosphere 8 years. I give the nod to Green Mountain Coffee Roasters on this one.

Let's Compare Price/Sales.

Green Mountain Coffee Roasters and Salesforce.com have narrowed their gap in Price/Sales ratio. Both are high compared to the average stock in the S&P 500. Green Mountain Coffee Roasters is more reasonable than Salesforce.com on a Price/Sales basis.

We'll move the contest over to Price/Cash Flow. Salesforce.com shines when compared to Green Mountain Coffee Roasters in Price/Cash Flow. Salesforce.com's operating cash has been its big winner. Green Mountain Coffee Roasters has significant challenges here. In addition, its FCF has been abyssmal, being solidly negative for over three years.

Salesforce.com, however, has started to lose its remarkable operating cash flow year over year growth. During the last six months, operating cash flow increased only 1.3% over last year's analogous period.

Salesforce.com is experiencing decelerating operating cash flow growth. Still, CRM beats Green Mountain Coffee Roasters in cash flow generation.

Green Mountain Coffee Roasters has won on 4 out of 5 parameters.

Although both stocks are pricey, Salesforce.com appears far more prone to a major correction. Although Salesforce.com has a great story, its numbers don't justify its share price. No stock can keep up a P/E over 100 forever. Eventually, all high fliers revert to a P/E under 25. Salesforce.com is ripe for a fall.

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.

Source: Green Mountain Coffee Roasters, Salesforce.com: Ripe For A Fall?