Salesforce, Inc. (CRM) vs Southwest Airlines Co. (LUV): Which Is the Better Buy in 2026?
As of 2026-11-01, CRM is overvalued at $229, with a DCF intrinsic value of $158 and a margin of safety of -45%. LUV is undervalued at $42, with an intrinsic value of $66 and a margin of safety of 35%. Of the two, LUV has the wider margin of safety.
Rewards
- ★Gross margin of 77.3% indicates strong pricing power — typical of businesses with significant intellectual property or brand strength.
- ★Free cash flow has grown at a 31.6% CAGR over the past 4 years, demonstrating strong earnings power growth.
- ★Each dollar of retained earnings has created $5.53 of earning power — management is an exceptional capital allocator.
- ★Share count has been reduced by 13% over the past 4 years through buybacks, increasing each share's claim on earnings.
- ★Trailing P/E of 20.7x is 50% below the historical average of 41.2x — potentially undervalued relative to its own history.
- ★PEG ratio of 0.22 suggests the stock is undervalued relative to its growth rate — paying less than 1x for each unit of earnings growth.
Risks
- ⚠Gross margin of 22.1% is low, suggesting a competitive or commodity-like market with limited pricing power.
- ⚠Buybacks have been poorly timed — 2 out of 2 years involved repurchases at relatively expensive valuations.
- ⚠Beneish M-Score of -1.64 flags financial patterns consistent with potential earnings manipulation — warrants further investigation.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →What growth rate is the market pricing in at $229?
The market implies +8.3% Owner Earnings growth, below historical trends — potential opportunity.
Standard FCF implies a more demanding +1.1%, reflecting heavy growth investment expected to generate future returns.
Requires positive FCF to compute implied growth rate.
Economic Moat Score
Learn more →Narrow moat with revenue predictability as the key competitive advantage. Improving roic consistency would strengthen the moat.
No durable moat detected, though revenue predictability shows some competitive positioning. The business lacks consistent evidence of sustainable advantages.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is pricing this stock without strong emotion in either direction"
"Market is pricing this stock without strong emotion in either direction"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: CRM vs LUV
Is Salesforce, Inc. or Southwest Airlines Co. more undervalued in 2026?▼
Based on our discounted cash flow model, LUV trades at a 35.2% margin of safety (intrinsic value $66 vs. price $42), compared to CRM's -45.4% margin of safety (intrinsic $158 vs. $229).
Which stock has a wider economic moat, Salesforce, Inc. or Southwest Airlines Co.?▼
CRM scores 58/100 (Narrow moat), while LUV scores 37/100 (None moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is Southwest Airlines Co. in financial distress?▼
LUV's Altman Z-Score of 2.2 places it in the Grey zone, signaling elevated bankruptcy risk. CRM scores 3.2 (Safe zone). The Altman Z-Score is a five-factor model that predicts insolvency within two years; scores below 1.81 indicate significant distress.
Which company has better free cash flow, Salesforce, Inc. or Southwest Airlines Co.?▼
Salesforce, Inc. (CRM) generates a 9.4% free cash flow yield, compared to Southwest Airlines Co.'s -3.0%. A higher FCF yield means the business converts more of its market value into cash that can be returned to shareholders or reinvested.
Which stock has higher return on invested capital, Salesforce, Inc. or Southwest Airlines Co.?▼
CRM earns 9.2% ROIC versus LUV's 7.9%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.
Which dividend is safer, Salesforce, Inc.'s or Southwest Airlines Co.'s?▼
CRM's dividend earns a safety score of 88/100 (Very Safe), compared to LUV's 46/100 (Borderline). CRM has raised its dividend for 1 consecutive years.
Does Southwest Airlines Co. have accounting red flags?▼
LUV's Beneish M-Score of -1.6 flags it as a likely earnings manipulator (above the -1.78 threshold). By contrast, CRM scores -2.7, within the normal range. The Beneish model detects aggressive accounting through eight financial ratios.