Cloud-based software company Salesforce (CRM) could be turning into another General Electric, a company that grows fast through acquisitions but fails to create value.

Salesforce appears to be on a solid footing in 2022. On Tuesday, the San Francisco-based company reported first-quarter financial results that beat analysts' estimates and gave upbeat guidance for the future.

Management rushed to take credit for the company's strong revenue growth.

“We had another great quarter, delivering $7.4 billion in revenue, up 24% year-over-year,” said Marc Benioff, the Co-CEO of Salesforce. “There is no greater measure of our resilience and the momentum in our business than the $42 billion we have in remaining performance obligation, representing all future revenue under contract. While delivering incredible growth at scale, we’re committed to consistent margin expansion and cash flow growth as part of our long-term plan to drive both top- and bottom-line performance.”

While revenue growth is a good measure of business growth, it isn’t a good indication of how effectively a company manages capital in pursuing that growth.

Economists and financial experts have another measure for that: economic profit or economic value added (EVA). That’s the difference between the return on invested capital (ROIC) and the weighted average cost of capital (WACC).

A positive EVA is an indication that the company manages capital effectively, creating value above the market as it grows. A negative EVA is an indication that the company destroys value as it grows.

Salesforce seems to fall into the second category. According to GuruFocus estimates, the company’s EVA has stayed consistently negative over the last decade, meaning it has been destroying value as it grows.

One of the explanations for the negative EVA could be that Salesforce is a new company. New companies usually have a negative EVA as they invest in projects that yield low returns in the short run. The other reason is that the company has been overpaying for acquisitions, which is at the core of its growth strategy.

Those who have been around long enough have seen this show before in companies like GE, which grew steadily in the 1990s and the early 2000s by going on an acquisition spree, often overpaying for acquisition targets. That's a strategy that transfers value of the stockholders of the acquirer to the stockholders of the acquired. The history of GE's stock over the last two decades confirms this principle.

Will Salesforce's share price have the same fate as GE?

It all depends on whether the company's EVA turns positive or continues to stick in negative territory.

Folio, an AI-powered trading insight platform developed by SynerAI, predicts that the rally in the company's shares will be short-lived.

"After today's Salesforce earnings call, SynerAI's AI-powered price prediction only sees a short-term positive gain in the stock for the rest of this week and maybe into next week,” SynerAI's chief growth officer Nathan Solmonese told International Business Times. “This positive reaction to the earnings call may be short-lived. With a 2-month investment horizon, we see up to a 20% downside risk for Salesforce stock driven by the overall slowdown in spending and economic activity, including the hiring of sales teams."