What happened
Shares of Service Today (NYSE: NOW) charges higher on Thursday, rising as much as 15%, before ending the trading day by 9.1%.
The catalyst that pushed the cloud-based digital workflow specialist higher were the financial results in the fourth quarter that easily exceeded expectations.
E what now
ServiceNow generated revenue of $ 1.61 billion, up 30% annually, renewing investor confidence in the company’s growth story. At the same time, the company delivered adjusted earnings per share (EPS) of $ 1.46, a 25% increase.
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To give context to those numbers, analysts ’consensus estimates call for revenue of $ 1.6 billion and adjusted EPS of $ 1.43.
ServiceNow’s current outstanding performance obligation-which represents sales that are under contract and will be recognized as revenue over the next 12 months-grew to $ 5.7 billion, up 29% year-over-year. It gives investors an enthusiastic insight into the future of the company.
Additionally, ServiceNow closed 135 agreements with more than $ 1 million in net new annual contract value (ACV), up 52% annually, while customers with more than $ 1 million in ACV were climbed 25%.
What now
ServiceNow has given investors another reason to rejoice. Management expects revenue in the first quarter in the range of $ 1.61 billion to $ 1.615 billion, representing growth of approximately 25%. Additionally, ServiceNow is guiding for full-year 2022 revenue of $ 7.03 billion, or growth of approximately 26%.
Management’s tendency to “beat and raise,” or exceed analysts ’expectations while also raising guidance, is enough for the stock to be higher.
I would be busy if I didn’t point out that even after its recent drubbing, ServiceNow stock is not cheap when measured using traditional metrics. It has a forward valuation of 14, when a reasonable price-to-sales ratio is generally considered to be between 1 and 2. As a result, the stock is likely to continue to be volatile, especially in the current environment of market. That said, management forecasts year-over-year revenue growth of 26% for 2022, which could be conservative because of its history.
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