The digital workflow company ServiceNow Inc. (NOW) recently reported a solid fourth quarter earnings report, beating consensus estimates above and below the line for the fourth consecutive quarter. However, the stock is currently trading 20% below its 52-week high of $ 707.60, which hit on November 4, 2021.
In January, Piper Sandler analyst Rob Owens upgraded NOW to Overweight with a target price of $ 650. However, the stock recently witnessed a hedge fund sentiment. Furthermore, the effects of the COVID-19 omicron variant and the growing number of cyber-attacks cause its near prospects to be uncertain.
Here’s what could shape NOW’s performance in the coming months:
Stable Finance
NOW’s net sales rose 29.1% year-over-year to $ 1.61 billion in the fourth quarter ended Dec. 31, 2021. The company’s operating income grew 94.4% year-over-year to $ 35 million . Also, its net income reached $ 26 million, up 52.9% year-over-year. The company’s EPS climbed 62.5% year-over-year to $ 0.13.
Favorable Analyst Estimates
For fiscal 2022, analysts expect NOW’s EPS and revenue to grow 24.7% and 25.4% year-over-year to $ 7.38 and $ 7.39 billion, respectively. In addition, its EPS is expected to grow at 26.1% per annum over the next five years. Moreover, Wall Street analysts expect the stock to hit $ 685.22 in the near term, indicating a potential increase of 17.9%.
Lower than Industry Profitability
In terms of trailing-12-month EBIT margin, NOW’s 4.66% is 48.4% lower than the industry average of 9.04%. Also, its trailing-12-month net income margin of 3.90% is 41.1% lower than the industry average of 6.62%. Moreover, the stock’s trailing-12-month ROCEROTC, and ROTA of 7.04%, 3.16%, and 2.13%were lower than the industry averages of 8.50%, 4.91%, and 3.91%, respectively.
Prolonged Appreciation
In terms of forward P/S, NOW’s 15.59x is 314.9% higher than the industry average of 3.76x. Also, its forward P/B of 22.26x is 310.1% higher than the industry average of 5.43x. Moreover, the stock’s forward EV/S and non-GAAP P/E of 15.59x and 78.92x were higher than the industry averages of 3.88x and 22.77x, respectively.
POWR Ratings Do Not Indicate Sufficient Inversion
NOW has an overall rating of C, which is equal to Neutral in ours POWR Ratings system. POWR Ratings are calculated by considering 118 different factors, each factor being weighed at the optimal level.
Our proprietary rating system also evaluates each stock based on eight different categories. NOW has a D grade for Value, along with appreciation ratios higher than its industry.
NOW also has a D grade for Momentum, which corresponds to its 15.4% decrease over the past three months. In addition, the stock has a C grade for Stability, which is compatible with its 1.04 beta.
NOW ranked #15 of 59 D-rated stocks Software – Business industry. Click here to access NOW ratings for Growth, Sentiment, and Quality.
Bottom Line
NOW is currently trading below its 50-day and 200-day moving averages of $ 601.58 and $ 589.52, respectively, indicating a downtrend. However, NOW seems to be overvalued at the current price level, and it may be wise to wait for a better entry point in the stock.
How ServiceNow Inc. Performs. (NOW) Against its Peers?
Although NOW has an overall POWR Rating of C, you may want to consider investing in Software-Business stocks with a rating of A (Strong Buy) or B (Buy), such as F5 Networks, Inc. (FFIV), Agilysys, Inc. (AGYS), and VMware Inc. (VMW).
NOW shares were trading at $ 567.15 per share on Thursday afternoon, down $ 14.00 (-2.41%). Year -to -date, NOW is down -12.63%, compared to a -5.26% increase in the benchmark S&P 500 index over the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s His keen interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving the price of a stock is the main strategy he follows while advising investors in his articles. More…
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