After the stock market closed yesterday, the IT service company ServiceNow once again announced excellent data for the second quarter. Therefore, it is no wonder that after this successful news, the stock price was able to hit a record high in euro prices.
But what makes ServiceNow so operationally powerful, and can participation in it pay off?
business model
Among other things, ServiceNow relies on the digitization and automation of manual business processes. In addition, the company takes care of all IT issues of its customers. There is no doubt that ServiceNow’s business model can benefit from the effects of the corona crisis.
Because the virus has ensured that many large companies are forced to undergo digital transformation. On the one hand, this is manifested in a new way of working and the related need to store all data on the cloud.
On the other hand, the crisis has also led to increasing pressure on profit margins and cost savings. Therefore, many companies have to lay off employees. Many manual activities have been replaced by the automation of business processes. This even created a moat for ServiceNow. Because most customers maintain business relationships even after implementing transformation projects. No wonder, because ServiceNow has expertise in all processes and in some cases understands interdependencies better than the corresponding company. This is why most customers stay with us for a long time.
Details of the second season
The current quarterly data of many technology companies has aroused the enthusiasm of analysts. Because it was predicted in the previous year that it may be very difficult by 2021. This is mainly due to the base effect of the previous fiscal year. Due to the impact of the new crown virus, many IT companies’ sales and profits have seen disproportionate growth as early as 2020. Therefore, people worry that future growth has been exploited.
However, looking at ServiceNow’s sales will find that its growth momentum is unabated. Because compared with the same period last year, sales climbed to 1.41 billion US dollars, a corresponding increase of 31.8%. But profits can also convince investors. This rose to $1.42 per share (+ 15.4%).
In addition, the last quarter also provided sufficient assurance to the management that the forecast for the full year has been improved. All in all, the data shows that ServiceNow’s chances of success still have no major flaws.
Appearance
In my opinion, it is never too late to invest in ServiceNow. Because the latest data once again show that business dynamics and company growth are intact. Although the company’s 2021 P/E (price-to-earnings ratio) has been rated at approximately 113 times, this does not prevent further price increases in the future (as of July 29, 2021; estimated profits not included in special profits) use effect) .
For example, like Microsoft or Amazon, you can see that high-quality companies always trade at high P/E ratios. Given the corresponding growth rate and moats like ServiceNow, the current assessment is reasonable. Despite this, these shares were trading at less than 100 euros three weeks ago. Therefore, setbacks are expected in the future, which can be used to start.
Article ServiceNow: This sharing cannot be surpassed! First appeared on The Motley Fool Germany.
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Michael owns shares in ServiceNow, Microsoft and Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten works at LinkedIn and is a board member of The Motley Fool. LinkedIn is part of Microsoft. The Motley Fool owns and recommends the stocks of Amazon, Microsoft and ServiceNow, and recommends the following options: January 2022 long $1,920 on Amazon and January 2022 short-term Amazon $1,940 call options.
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