Like Salesforce (CRM)? Here’s Why THIS Stock Is the Better Choice

Salesforce (NYSE: CRM) needs no introduction. The almost $180 billion market cap titan is a dominant figure in the CRM space. And while it remains quite popular with retail investors, the stock is in a tough spot. Salesforce shares have lost almost 25% in value in the past 3 months. 

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While the growth figures shown in the company’s last earnings report on February 25 were decent, weak forward guidance has led to a notable shift in sentiment, even among Wall Street analysts.

So, is this to say that Salesforce is a bust? Not at all. 

Our in-house rating system, which looks at 115 fundamental factors and metrics, puts CRM in the 81st percentile of all stocks. In other words, it ranks in the top 19% of the more than 4,600 stocks that we track in terms of fundamentals. That gives it a Zen Rating of B, equivalent to a Buy rating. Stocks of that caliber have provided an average annual return of 19.88% since the early 2000s.

So what’s the stock? Diebold Nixdorf (NYSE: DBD).

That’s more than decent — but there’s plenty of room for improvement. Better opportunities are out there — like, for example, the much more unassuming Diebold Nixdorf (NYSE: DBD), a low-profile infrastructure company that keeps global banking and retail transactions running.

DBD ranks in the top 1% of stocks per our system, giving it a Zen Rating of A, equivalent to a Strong Buy — and that small change from B to A is the difference between, like we said, an average annual return of 19.88% and an average return of 32.52%.

In fact, DBD currently ranks 3rd overall in terms of fundamentals — just for reference, CRM ranks 797th.

Both of these tickers belong to the App industry, which has an Industry Rating of B. DBD is the top-rated stock in the industry, while CRM clocks in at 42nd place.

Alright — let’s get into specifics, to actually illustrate what goes on under the hood of the Zen Ratings. Each rating is a composite score based on how a stock ranks in terms of 7 Component Grade ratings, which tell us the specific strengths and weaknesses of a stock. The top scorecard you’ll see below is CRM’s, and the bottom one is DBD’s.

Let’s begin with the Value Component Grade rating, which takes into account 22 metrics. Here, CRM ranks in the top 22% — but DBD ranks in the top 8%. Both stocks are trading at reasonably similar trailing and forward price-to-earnings (P/E) ratios. However, Diebold Nixdorf has the advantage in one key area — valuation relative to growth. DBD’s price-to-earnings growth (PEG) ratio is 0.3x, indicating that it is severely undervalued, while CRM’s ratio of 1.07x suggests relatively fair pricing. Point one for DBD.

When it comes to Growth, CRM is in the 67th percentile, while DBD ranks in the 99th. Earnings growth estimates are the key difference here. Wall Street expects Salesforce to grow earnings by 23.17% per year. For DBD, the expectation is 115.58%.

Both stocks earn high marks for Sentiment — 91st percentile for CRM, 98th for DBD. And the average price targets from Wall Street are also similar. Analysts expect to see Salesforce shares rally by 41.3% in the next 12 months, while for Diebold Nixdorf, the expectation is 39.47%. 

That’s not the only factor that goes into our Sentiment rating — what I’d like for you to take away from this is that both stocks have smart money’s seal of approval, but one has clearly superior fundamentals and strengths in other areas.

Our Safety rating measures not only stock price stability, but also how predictable earnings are. Here, CRM is in the bottom 26% — DBD is in the top 9%. 

To cap it all off, I won’t bore you with the details of every single Component Grade rating — suffice to say that when it comes to Financials and our Artificial Intelligence rating, which uses a neural network trained on more than two decades of market data to detect likely outperformers, the stocks are relatively evenly matched.

There are a bunch of advantages here working in DBD’s favor. While the gap is largest when it comes to Safety, the difference in valuation is what jumps out at me the most. There’s a veritable chasm between CRM’s PEG ratio of 1.07x and Diebold Nixdorf’s 0.3x. To boot, with Salesforce, you’ve got a price-to-sales ratio of 4.86x — DBD’s P/S ratio currently stands at 0.66x.

The fact that DBD is severely undervalued won’t remain unnoticed for long. Sure, it might not be a giant like CRM, but Diebold is a $2.52 billion company, firmly in the mid-cap designation. They’ve also beat earnings estimates for 4 quarters in a row, and that sort of consistent execution attracts attention, sooner or later.  

It’s a steal, and there isn’t much point in trying to time it for an even bigger discount at this time, as the stock has been trading in line with the wider market as of late. I’d be confident in opening a position at these prices — and I invite you to take a closer look at it to determine if the same holds true for you.

—> Click here to compare DBD and CRM

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