ServiceNow NOW
What does ServiceNow do?
ServiceNow operates a cloud-based platform that companies use to digitize and automate workflows. Originally rooted in IT service management, its offering now extends from IT operations and asset management through security and risk management to customer service, HR processes, legal and contract workflows, and procurement. It also includes tools for building custom applications and AI-supported automation features that run on the same platform.
The company generates most of its revenue from subscriptions for access to the software, supplemented by professional services such as implementation and consulting. Customers are mainly large corporations and government agencies in North America, Europe and the Asia-Pacific region. In competition, ServiceNow faces enterprise software providers such as Salesforce, Microsoft, SAP and Atlassian. Its advantage lies in a unified platform and data architecture, which makes it comparatively easy to add further applications for existing customers.
Score profile
Rank vs. Software - Application (71 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, ServiceNow ranks in the middle in the group Software - Application (5.0/10). On growth, the company ranks in the middle in the group Software - Application (4.7/10). On valuation (higher = cheaper), the stock ranks below average in the group Software - Application (3.9/10). On financial strength, ServiceNow ranks below average in the group Software - Application (3.4/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 20.7x | 18.0x | better than 35 % |
| Trailing P/E | 71.7x | 32.7x | better than 18 % |
| PEG ratio | 0.8x | 1.4x | better than 75 % |
| EV/EBITDA | 34.2x | 19.7x | better than 23 % |
| Price/sales | 6.7x | 4.4x | better than 25 % |
| Price/book | 7.9x | 5.5x | better than 35 % |
| Revenue growth | 20.5% | 10.8% | better than 81 % |
| Earnings growth | -44.2% | 9.4% | better than 14 % |
| Gross margin | 73.1% | 71.8% | better than 54 % |
| Operating margin | 17.4% | 15.7% | better than 57 % |
| Net margin | 9.4% | 12.3% | better than 42 % |
| Return on equity | 11.9% | 13.2% | better than 46 % |
| Debt/equity | 64.3% | 46.9% | better than 34 % |
| Current ratio | 0.7x | 1.2x | better than 15 % |
| Free cash flow yield | 5.6% | 5.3% | better than 54 % |
| Dividend yield | 0.0% | 1.1% | – |
| Payout ratio | 0.0% | 31.2% | – |
| Beta | 0.98 | 0.96 | – |
Valuation: what is ServiceNow worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give ServiceNow a model range of 54.56 USD to 210.58 USD per share.
46 analysts, average rating “Strong buy”, average price target 155.82 USD (+56.4%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Recurring subscription revenue arises from long-term contracts with large customers and high renewal rates.
- Additional sales of further modules to existing customers increase revenue per customer on the shared platform.
- Companies' need for automation and AI applications drives demand for digital workflow solutions.
Risks
- Strong competition from large software providers may create pricing pressure and put market share at risk.
- Weaker IT budgets during economic downturns may delay new business and contract signings with large customers.
- Share-based compensation, acquisitions and the high investment needs for AI weigh on profitability and create integration effort.
What to look for with ServiceNow
The share of recurring subscription revenue, together with the renewal rate, shows how stable and predictable the business is and how well customer retention works.