Shares of salesforce.com (NYSE:CRM) are soaring this morning, lofted upward by the twin winds of a superb fiscal fourth quarter, and rumors that a buyout is in the offing.

Let's dispose of the rumor first and then move on to hard facts. According to TheStreet.com, anyone from Oracle (NASDAQ:ORCL) to Microsoft (NASDAQ:MSFT) to SAP (NYSE:SAP) might or might not be interested in buying salesforce.com. OK, I guess that sounds reasonable. But one element of the rumor appears to be missing -- Google (NASDAQ:GOOG), which already partners with salesforce.com. The two companies' Web-based business models dovetail nicely, and a tie-up would pose a clear threat to the offline software business of Google nemesis Microsoft -- and by extension, I suppose, Yahoo! (NASDAQ:YHOO).

Just the failure to mention Google, in my view, drains the rumor of much of its credibility.

Back to facts
With that out of the way, let's look at what salesforce.com actually did last quarter, as opposed to what it might do in some future quarter. As I mentioned, Q4 was simply superb. As predicted, the company booked more than $200 million in sales -- but how much over that amount is the real story. Wall Street had been looking for $209 million, and salesforce.com delivered $217 million, a 50% year-over-year improvement. Profits came to $0.06 per share, versus breakeven in last year's Q4, and free cash flow more than doubled.

For the year, sales grew more than 50%. Free cash flow outpaced that performance with an 80% improvement to $160.7 million. And per-share profits were up by ... let's see now ... infinity -- from breakeven in 2006 to $0.15 per diluted share in 2007. What's more, the operating margin worked out to 2.7% last year, so the company didn't need to depend on interest on its cash stash to keep profits rising. However, interest income did, in fact, keep rising.

Valuation
At today's price, which is 18% higher than yesterday, salesforce.com shares trade for around 696 times trailing earnings. A bit pricey, you say? Well before you make up your mind, consider that if you value the company on its free cash flow, then salesforce.com shares can now be had for 46 times trailing free cash flow. So if you buy analysts' projection of 46% annual profits growth over the next five years, then far from being overpriced, salesforce.com is actually a bargain -- for the rumored takeover artists, and for you, too.

Is it time to grab salesforce.com by the horns, or is this stock ripe for bear-baiting? Watch two of our top Fools duke it out in: