Why ServiceNow Is an Excellent Investment


ServiceNow (NYSE:NOW) is riding high on solid fundamentals, fueled by a strong portfolio and a growing customer.

NOW’s prospects are further aided by the optimistic U.S. equities market trends, which are supported by lower oil costs, easing inflationary pressures, and a steady Fed policy. Investors’ anxieties about the global economic recovery have been alleviated as supply chain conditions have improved.

Year to date, all major stock indices are in positive territory. The Dow Industrial, Nasdaq, and S&P 500 have all gained 1.78%, 29.9%, and 14.4%, respectively. Top-ranked stocks like ServiceNow can help enhance investor portfolio returns in this circumstance. 

Why is NOW a Good Time to Buy?

A Star Performer: A look at NOW’s price history reveals that the company has gained 39.8% year to date, compared to 9.7% for the Computer – IT Services category.

Trading Significantly Lower Than 52-Week High: ServiceNow stock is now trading lower than its 52-week high, indicating that it has the potential to rise. The stock closed at $542.99 on June 23rd, 5.85% lower than its 52-week high of $576.68 on June 15, 2023.

Attractive Value: NOW stock is currently trading at an appealing valuation multiple. The stock currently trades at a one-year forward price-to-sales ratio of 11.38X, compared to a five-year average of 12.25X.

Positive Earnings Surprise History: NOW has a strong track record of positive earnings surprises. The company outperformed expectations in each of the previous four quarters, with an average profit surprise of 10.36%.

Strong Growth Prospects: The Consensus Estimate for 2023 earnings is $9.59 per share, implying a 26.35% increase. Earnings are expected to be $11.95 per share in 2024, representing a 24.63% increase.

ServiceNow has benefited from the increasing usage of its processes by organizations undergoing digital transformation. It maintains market share by replacing on-premise old systems with cloud-based operations. Its focus on public and large private companies is projected to drive long-term top-line growth.

Finance and Supply Chain Workflows, Now Assist for Search, and ServiceNow Generative AI Controller are three of ServiceNow’s new AI-powered technologies that are gaining popularity and producing subscription revenue.

Partnerships with Microsoft and NVIDIA have helped ServiceNow’s enterprise grade generative AI capabilities, which alter business processes by automating workflows more quickly and intelligently. Companies can expect to save money while increasing productivity and automating workflows using these solutions.

ServiceNow welcomed 280 new clients with annual contract values exceeding $1 million in the first quarter of 2023, bringing the total client count to 1,682.

Image: Image by Freepik

Please See Disclaimer

About the author: Stephanie Bédard-Châteauneuf has over seven years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, market news, and personal finance. She has an MBA in finance.