Citrix Systems (CTXS), Adobe Systems (ADBE), salesforce.com, inc. (CRM): A Lot of Potential for Those Who Want Some Adventure in Their Portfolios

Alternatives

As an alternative to salesforce.com, inc. (NYSE:CRM), consider rivals like Citrix Systems (NASDAQ:CTXS) and Adobe Systems (NASDAQ:ADBE), which offer similar products, however with a more stable record of profitability.

Citrix Systems (NASDAQ:CTXS) is about half the size of salesforce.com by market cap, and has a very similar product and service portfolio, making it possibly the closest comparison. Unlike salesforce.com, however, Citrix Systems (NASDAQ:CTXS) has an established track record of profitability and earnings growth, with $1.86 per share in profit last year. Although the stock trades at a P/E of above 30, that is not necessarily expensive if the growth rate of the company justifies it, which doesn’t really appear to be the case here. According to the consensus, Citrix Systems (NASDAQ:CTXS) is expected to grow its earnings by around 12% annually, which makes the valuation sound a little high.

Adobe Systems (NASDAQ:ADBE) has a much more diverse and well-known product portfolio than the other two with its Photoshop and Acrobat software, which the company has been shifting to cloud and subscription services. As the most mature company here, you may expect it to trade at a more down-to-earth valuation. However, Adobe Systems (NASDAQ:ADBE) appears to be the most overvalued of the three. At 31 times TTM earnings and just 10% growth projected, I would wait for a significant pullback before investing in Adobe Systems (NASDAQ:ADBE).

How to trade it

The cloud computing sector is certainly an expensive one, if you’re looking at current earnings and projections for the next few years. However, this is an industry that is still in its infancy, and the full potential of cloud computing and SaaS remains to be seen. For those adventurous enough to dive in to one of these companies, you may just be getting into the next big thing on the ground floor. Bear in mind though, that there is tremendous risk when investing in a young industry such as this one.

The article A Lot of Potential for Those Who Want Some Adventure in Their Portfolios originally appeared on Fool.com and is written by Matthew Frankel.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.