Recently, leading software-as-a-service company Salesforce (NYSE:CRM) had its annual Dreamforce conference. At the event, management put forward some seemingly lofty goals, including a forecast to more than double Salesforce's revenue from $17 billion in 2020 to $35 billion in fiscal 2024. (Of note: Salesforce's fiscal year ends in January, so fiscal years mostly encompass results from the preceding calendar year.)

Doubling revenue over four years equates to roughly 20% compound annual growth, which is highly impressive for a company as large as Salesforce. However, there are a few big caveats you should realize about Salesforce's lofty revenue ambitions before you jump in.

A businessman in suit and tie holds a magnifying glass up to a sheet of paper laying on a wooden desk.

Is Salesforce's growth impressive? Image source: Getty Images.

Not totally organic

Impressively, Salesforce's forecast excludes any of its trademark mergers and acquisitions. That means one could think of Salesforce's growth over the next few years as totally "organic."

However, calling this 20% growth "organic" is still a bit of a red herring. That's because, over the past 3 1/2 years, Salesforce has bought a lot of companies for a lot of money and stock:

Salesforce
Fiscal Year

Acquisitions

Amount Paid

Major Acquisitions

FY 20

3

$16.5 billion

Tableau, Clicksoftware

FY 19

3

$7.4 billion

Mulesoft, Datorama, Cloudcraze

FY 18

2

$38 million

N/A

FY 17

13

$4.4 billion

Demandware, Krux Quip

Data source: Salesforce annual and quarterly reports. Table by author.

As you can see, Salesforce has shelled out a whopping $28.3 billion on more than 20 acquisitions over the past 3 1/2 years. In fact, the $16.5 billion just spent during this fiscal year -- which isn't over yet -- is almost the same amount as the revenue increase Salesforce is predicting by 2024.

Considering that this is the software space, these acquisitions were not cheap. While many of the acquisitions were very high-growth companies, most of the acquirees were relatively small compared to the prices paid. Here are some of the largest acquisitions and price-to-sales ratios paid for each:

Salesforce Acquisition

Year Acquired

Purchase price

Approximate Price-to-Sales Ratio (If Public)

Tableau Software

2019

$14.9 billion

13

Datorama

2018

$766 million

20

Mulesoft

2018

$6.425 billion

22

Demandware

2016

$2.9 billion

10

Krux

2016

$742 million

undisclosed

Data source: Salesforce filings and news articles. Table by author.

Notably, the two largest acquisitions were still quite expensive. Mulesoft was bought at a staggering 22 times sales. Tableau, the largest to date, was bought at 13 times sales. Neither company was profitable at the time.

Obviously, there was a lot of sales growth baked into Salesforce's largest acquisitions. Thus, it would be highly suspect if Salesforce didn't grow a lot in the coming years as a result of these newly acquired assets.

A different strategy in tech, but a good one?

No doubt, Salesforce's roll-up strategy could work if the company is able to plug each acquisition into the Salesforce system, cut costs, and accelerate revenue growth. To its credit, the stock has done quite well during this tech bull market.

However, Salesforce is far, far more acquisitive than most of the other large tech giants, especially relative to Salesforce's size. That means Salesforce's growth shouldn't be viewed exactly the same way or of being the same quality as more mature companies.

While Salesforce's revenue growth and ambitions are impressive, investors should realize that this is more expensive growth than that of its large-cap tech peers. This is the reason investors should take Salesforce's lofty revenue goals with a grain of salt.