A strong performer from today's morning trading session is ServiceNow, whose shares rose 13.4% to $828.79 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
ServiceNow's Valuation Is in Line With Its Sector Averages:
ServiceNow, Inc. provides end to-end intelligent workflow automation platform solutions for digital businesses in the North America, Europe, the Middle East and Africa, Asia Pacific, and internationally. The company belongs to the Technology sector, which has an average price to earnings (P/E) ratio of 31.58 and an average price to book (P/B) ratio of 4.11. In contrast, ServiceNow has a trailing 12 month P/E ratio of 149.3 and a P/B ratio of 19.69.
ServiceNow's PEG ratio is 2.75, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Wider Gross Margins Than the Industry Average of 63.21%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $2,609 | $3,460 | $4,519 | $5,896 | $7,245 | $8,971 |
| Gross Margins | 76% | 77% | 78% | 77% | 78% | 79% |
| Net Margins | -1% | 18% | 3% | 4% | 4% | 19% |
| Net Income (M) | -$27 | $627 | $119 | $230 | $325 | $1,731 |
| Net Interest Expense (M) | $53 | $33 | $33 | $28 | $27 | -$56 |
| Depreciation & Amort. (M) | $150 | $252 | $336 | $472 | $433 | $562 |
| Diluted Shares (M) | 178 | 197 | 202 | 203 | 204 | 206 |
| Earnings Per Share | -$0.15 | $3.18 | $0.59 | $1.13 | $1.6 | $8.42 |
| EPS Growth | n/a | 2220.0% | -81.45% | 91.53% | 41.59% | 426.25% |
| Avg. Price | $173.69 | $254.86 | $409.01 | $574.99 | $517.44 | $828.79 |
| P/E Ratio | -1157.93 | 75.85 | 670.51 | 495.68 | 321.39 | 97.73 |
| Free Cash Flow (M) | $587 | $971 | $1,367 | $1,799 | $2,173 | $2,704 |
| CAPEX (M) | $224 | $265 | $419 | $392 | $550 | $694 |
| Current Ratio | 1.17 | 1.03 | 1.21 | 1.05 | 1.11 | 1.06 |
ServiceNow has rapidly growing revenues and increasing reinvestment in the business and exceptional EPS growth. Additionally, the company's financial statements display generally positive cash flows and wider gross margins than its peer group. Furthermore, ServiceNow has just enough current assets to cover current liabilities, as shown by its current ratio of 1.06.
