Should you buy ServiceNow stock? (July 2023)
- 8 months ago
ServiceNow stock analysis.
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Back in 2003, entrepreneur Fred Luddy felt there was a disconnect between business teams and IT departments. Luddy set up ServiceNow to bridge that gap. It’s software helps businesses streamline and ultimately replace IT systems.
The business has been an incredible success and today the company is valued at 115 billion dollars. With 7.2 billion of cash and investments and 1.5 billion of debt, the enterprise value is 109 billion.
Revenue over the last 12 months is 7.6 billion, net income is 400 million with 2.1 billion of free cash flow. 96% of ServiceNow revenue comes through recurring subscriptions and the company has strong gross margins of 78%.
And ServiceNow boasts several other attractive qualities. Its products are used by 80% of the Fortune 500, with a 98% renewal rate and 125% net expansion rate. As seen by the chart, ServiceNow does an excellent job of keeping customers and generating incremental revenue from each one.
In addition, ServiceNow stock has been outstanding, providing almost 35% annualized returns over the last 5 years. Software investors often talk about the rule of 40 but ServiceNow claims it occupies the rule of 60 since it previously posted 30% revenue growth and 32% free cash flow margin.
To be fair, last year’s revenue growth dropped to 23% and revenue growth rates have been declining steadily over time.
But ServiceNow management is optimistic. Its revenue target for 2026 was upgraded from 15 billion to 16 billion and management believes its software can now be expanded across other company departments such as sales, legal and human resources. In addition, ServiceNow has plans to grow in international markets.
#servicenowstock #investing #stocks #stockstobuy
Visit our website for more: https://www.overlookedalpha.com
Back in 2003, entrepreneur Fred Luddy felt there was a disconnect between business teams and IT departments. Luddy set up ServiceNow to bridge that gap. It’s software helps businesses streamline and ultimately replace IT systems.
The business has been an incredible success and today the company is valued at 115 billion dollars. With 7.2 billion of cash and investments and 1.5 billion of debt, the enterprise value is 109 billion.
Revenue over the last 12 months is 7.6 billion, net income is 400 million with 2.1 billion of free cash flow. 96% of ServiceNow revenue comes through recurring subscriptions and the company has strong gross margins of 78%.
And ServiceNow boasts several other attractive qualities. Its products are used by 80% of the Fortune 500, with a 98% renewal rate and 125% net expansion rate. As seen by the chart, ServiceNow does an excellent job of keeping customers and generating incremental revenue from each one.
In addition, ServiceNow stock has been outstanding, providing almost 35% annualized returns over the last 5 years. Software investors often talk about the rule of 40 but ServiceNow claims it occupies the rule of 60 since it previously posted 30% revenue growth and 32% free cash flow margin.
To be fair, last year’s revenue growth dropped to 23% and revenue growth rates have been declining steadily over time.
But ServiceNow management is optimistic. Its revenue target for 2026 was upgraded from 15 billion to 16 billion and management believes its software can now be expanded across other company departments such as sales, legal and human resources. In addition, ServiceNow has plans to grow in international markets.
#servicenowstock #investing #stocks #stockstobuy