They're at it again. Both of 'em.

Once again, salesforce.com (NYSE:CRM) beat or equaled Wall Street's estimates:

  • Revenue topped $331 million.
  • GAAP earnings doubled from last year to $0.16 per share.
  • Operating cash flow more than doubled to $36 million (bringing free cash flow for the last 12 reported months to $195.9 million).

And once again, the skeptics scream at salesforce for its failure to grow "deferred revenue." With such payments -- received by salesforce, but not yet booked as revenue on the income statement -- on the decline versus recent quarters, investors are lining up to sell off the stock, worried that the growth we saw in the third quarter is about to come to a screeching halt.

Balderdash
The last time we saw concerns of this sort, CEO Marc Benioff dismissed them with a curt statement: "[Deferred revenue] is not a metric that we use internally." And if the proof really is in the pudding, it's worth pointing out that salesforce did in fact grow revenue: 43% in Q3 2008, 43% in Q4 2008, 23% in Q1 2009, 20% in Q2 2009, and now ... 20% again.

So did deferred-revenue concerns last year portend a slowdown in business? Definitely. But did they stop the growth train in its tracks? Definitely not. What's more, back-to-back quarters in the low 20s suggest that far from slowing down, salesforce may have hit its business nadir in this Great Recession of ours, and is now ready to spring back upward. And in fact, Benioff is promising just this. Revenue guidance got upped as part of the earnings report. Earnings guidance, too.

Far from slowing down, salesforce looks set to go gangbusters. Wall Street projects 36% long-term growth, which is far faster than its forecasts for rivals like Microsoft (NASDAQ:MSFT), Oracle (NASDAQ:ORCL), or even Google (NASDAQ:GOOG). Which means that ... it's time to ditch salesforce.

Huh?!
Surprised? You shouldn't be. I told you three months ago that salesforce was too expensive. It still is, growth prospects notwithstanding. According to salesforce's new projections, it will end this year with perhaps $0.63 per share in earnings. That makes for a P/E ratio of 100. The free cash flow picture is a little prettier, but still works out to a trailing P/FCF ratio of 40. In neither case do salesforce's profits or growth rates justify owning the stock at these multiples.

Foolish takeaway
Once again, Wall Street's right for the wrong reasons. But the point is: It is right to consider selling salesforce.

Fools of a feather don't always flock together. Do the hypergrowth investors at Motley Fool Rule Breakers agree that salesforce has gotten too big for its britches? Sign up for your free 30-day trial, and find out.