The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But on a lighter note, a good company can see its share price increase by more than 100%. For example, the price of ServiceNow, Inc. (NYSE:NOW) stock is up an impressive 285% over the past five years. It is down 6.6% in the last seven days.
With the stock down 6.6% over the past week, we wanted to investigate the longer-term story, and see if fundamentals have been the driver of the company’s positive five-year return.
Check out our latest review for ServiceNow
Since ServiceNow has generated little revenue over the past twelve months, we’ll focus on revenue to gauge the growth of its business. Generally, we would consider a stock like this among loss-making companies, simply because the earnings volume is so low. It’s hard to believe in a more profitable future without growing profits.
Over the past 5 years, ServiceNow has seen its revenue grow at 27% per year. Even when measured against other profit-oriented companies, that’s a good result. So it’s not entirely surprising that the share price has reflected this performance by increasing at a rate of 31% per year, over that period. So consumers likely paid attention to the strong income growth. In our opinion that makes ServiceNow worth investigating – it may have its best days ahead of it.
The graphic below illustrates how earnings and profits have changed over time (reveal exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. However, future earnings will be more important if current shareholders are profitable. If you’re thinking about buying or selling ServiceNow stock, you should check it out Free report showing analyst earnings forecasts.
A Different View
We are sorry to report that ServiceNow shareholders are down 30% for the year. Unfortunately, that was worse than the broader market’s decline of 15%. However, it could just be that the share price has been affected by wider market jitters. It might be worth keeping an eye on the basics, just in case there’s a good chance. On the bright side, long-term shareholders have made money, with gains of 31% per year over half a decade. If fundamental data continues to indicate long-term sustainable growth, the current sell-off may be an opportunity to consider. While it’s worth considering the various effects of market conditions on share prices, there are other factors that are more important. Consider for example, the current specter of investment risk. We identified 1 warning sign in ServiceNow , and understanding them should be part of your investment process.
If you want to buy stocks next to management, you might just like this Free list of companies. (Hint: insiders buy them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks currently trading on US exchanges.
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This Simply Wall St article is general. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take into account your goals, or your financial situation. We aim to bring you long-term focused analysis driven by primary data. Note that our review may not factor in the company’s latest price-sensitive or material quality announcements. Simply Wall St has no position in any of the stocks mentioned.
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