Three months ago, I took a look at the Q2 earnings report from Motley Fool Rule Breakers recommendation salesforce.com (NYSE: CRM) and declared it impressive, but ... overpriced. Specifically, I worried that no matter how fast the stock was going, it wasn't worth "paying the 50x FCF cost of admission."

Shows you how much I know. Turns out, that price was a bargain.

On-demand software, on-demand profits
Salesforce shares are soaring 16% (and counting) today after the company stunned the skeptics once again:

  • Revenues -- up 30% year over year
  • "Deferred revenues," which indicate future growth prospects -- up 27%
  • Net paying customers -- those were up too, by 28%

Fact is, about the only thing not up at Salesforce last quarter were its GAAP profits. At $0.15 per share, those actually slipped 6%. But not to worry -- the kind of profits that really count, the free cash flow, were there in abundance.

Doubling its operating cashflow year over year, Salesforce brought $53.9 million more cash through the door in Q3, which was more than twice reported "profits" under GAAP. Year-to-date, the company's generated a whopping $233 million worth of free cash flow, putting it on track to end the year near $310 million.

Reality check
So ... why am I still pessimistic about Salesforce's prospects? I mean, the company's met or exceeded expectations all year long. Its growth prospects seem sound, and this morning, investors rewarded the stock with a 16% price-bump. What's not to like?

Same thing as I didn't like last quarter: The price. You see, as fast as this stock's growing, its earnings are being hard-pressed to keep up. The valuation today looks closer to 56 times free cash flow. The P/E's in the triple digits.

Yet no matter how well Salesforce has done in the past, no company grows forever. Analysts are looking for 27% growth over the next five years -- about the pace sales are growing today, and faster than earnings are growing. That may be faster growth than rivals Microsoft (Nasdaq: MSFT) or Oracle (Nasdaq: ORCL) will produce. It may be faster than Google (Nasdaq: GOOG). What it is not, is fast enough to justify a stock price this high. Literally any of the alternatives named offers a better valuation proposition than Salesforce does today.

Foolish takeaway
I don't know when. I don't know why, but sooner or later, Salesforce will hit a slump. And on the day the growth goes missing, you don't want to be holding this stock.