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ServiceNow

NYSE:NOW
Snowflake Description

Exceptional growth potential with mediocre balance sheet.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
NOW
NYSE
$21B
Market Cap
  1. Software
Company description

ServiceNow, Inc. provides enterprise cloud computing solutions that define, structure, manage, and automate services for enterprises worldwide. More info.


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3 Month History
NOW
Industry
5yr Volatility vs Market

Value

 Is ServiceNow undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of ServiceNow to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of ServiceNow is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for ServiceNow's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are ServiceNow's earnings available for a low price, and how does this compare to other companies in the same industry?
  • ServiceNow is loss making, we can't compare it's value to the US Software industry average.
  • ServiceNow is loss making, we can't compare the value of its earnings to the US market.
Price based on expected Growth
Does ServiceNow's expected growth come at a high price?
  • ServiceNow is loss making, we can't assess if it's growth is good value.
Price based on value of assets
What value do investors place on ServiceNow's assets?
  • ServiceNow is overvalued based on assets compared to the US Software industry average.
X
Value checks
We assess ServiceNow's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Software industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Software industry average (and greater than 0)? (1 check)
  5. ServiceNow has a total score of 0/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (35.06%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for ServiceNow is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$3,229

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $1,261 × (1 + 2.47%) ÷ (9.87% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$17,471

Present value of terminal value:
$10,913

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$14,142 = $3,229 + $10,913

Value = Total value / Shares Outstanding ($14,142 / 171)

Discount to Share Price

Value per share:
$82.84

Current discount (share price of $120.81): -45.84%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 9.87% = 2.47% + (0.983 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($20,616,899,471).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.983 = 0.946 (1 + (1- 30%) (5.53%))

Levered Beta used in calculation = 0.983



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is ServiceNow expected to perform in the next 1 to 3 years based on estimates from 31 analysts?

The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
92.7%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is ServiceNow expected to grow at an attractive rate?
  • ServiceNow's earnings growth is expected to exceed the low risk savings rate of 3.6%.
Growth vs Market Checks
  • ServiceNow's earnings growth is expected to exceed the US market average.
  • ServiceNow's revenue growth is expected to exceed the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • ServiceNow's earnings are expected to grow significantly at over 20% yearly.
  • ServiceNow's revenue is expected to grow significantly at over 20% yearly.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • ServiceNow is expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be above 20%.

Improvement & Relative to industry
  • Performance (ROE) is expected to be above the current US Software industry average.
  • An improvement in ServiceNow's performance (ROE) is expected over the next 3 years.
X
Future performance checks
We assess ServiceNow's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
ServiceNow has a total score of 6/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has ServiceNow performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare ServiceNow's growth in the last year to its industry (Software).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • ServiceNow does not currently make a profit.
Earnings and Revenue History
ServiceNow's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • ServiceNow has negative negative earnings from operations, therefore its ROE is meaningless.
  • ServiceNow had negative or no Return on Assets (ROA) last year.
  • Return based on revenue producing assets (ROCE) is negative or zero.
X
Past performance checks
We assess ServiceNow's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Software industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
ServiceNow has a total score of 0/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is ServiceNow's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up ServiceNow's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • ServiceNow is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • ServiceNow's cash and other short term assets cover its long term commitments.
Balance sheet
This treemap shows a more detailed breakdown of ServiceNow's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • Low level of unsold assets.
  • Total debt is covered by total short term assets, assets are 1.9x debt.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • ServiceNow's level of debt (236% of total debt) compared to net worth is high (greater than 40%).
  • The level of debt compared to net worth has increased over the past 5 years (0% vs 236.3% today).
  • Total debt is well covered by annual operating cash flow (greater than 20% of total debt).
  • ServiceNow is making a loss, therefore interest on debt is not well covered by earnings.
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Financial health checks
We assess ServiceNow's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. ServiceNow has a total score of 3/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is ServiceNow's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
0%
Current annual income from ServiceNow dividends.
If you bought $2,000 of ServiceNow shares you are expected to receive $0 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Not paying a dividend.
  • Not paying a dividend.
Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Not paying a notable dividend.
  • Not paying a notable dividend.
Current Payout to shareholders
What portion of ServiceNow's earnings are paid to the shareholders as a dividend.
  • Not paying a notable dividend.
Future Payout to shareholders
  • Insufficient estimate data to determine if a dividend will be paid in 3 years.
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Income/ dividend checks
We assess ServiceNow's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can ServiceNow afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. ServiceNow has a total score of 0/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of ServiceNow's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
CEO
John Donahoe, image provided by Google.
John Donahoe
AGE 56
TENURE AS CEO 0.5 years
CEO Bio

Mr. John J. Donahoe, II, has been the Chief Executive Officer and President of ServiceNow, Inc. since April 3, 2017. Mr. Donahoe has over 30 years of management experience. Mr. Donahoe served as the Chief Executive Officer and President of eBay Inc. from March 31, 2008 to July 17, 2015, where he oversaw the eBay, PayPal and eBay Enterprise businesses. Mr. Donahoe served as an Interim President of Paypal at eBay Inc. from January 3, 2012 to April 2012. He joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay's global e-commerce businesses. He served as an Interim President of eBay Marketplace at eBay Inc. since September 2010 and served as its President of Auction Business Unit since February 24, 2005. Prior to joining eBay, he served as the Chief Executive Officer and Worldwide Managing Director of Bain & Company, Inc. from 1999 to March 1, 2006 and served as its Managing Director from 1982 to 1999. He joined Bain & Company Inc. in 1982, served as the Head of the San Francisco office for seven years. At Bain, Mr. Donahoe oversaw its 29 offices and 3,000 employees worldwide and served clients in the telecommunications, airlines, aerospace and financial services industries. Prior to that, he worked for the Rolm Corporation and Salomon Brothers. He has been the Non-Executive Chairman and Director of PayPal Holdings, Inc. since July 17, 2015. He serves as Vice Chairman of the Advisory Council at Stanford Graduate School of Business. He has been an Independent Director of NIKE, Inc., since June 19, 2014 and Skype Global S.à r.l. (Skype S.à r.l.) since November 2009. He has been a Director of ServiceNow, Inc. since April 3, 2017. He serves as a Member of the Advisory Board and Director of eVolution Global Partners, L.L.C. He serves on the Board of Trustees at Dartmouth College and Sacred Heart Schools. He served as an Independent Director of Intel Corporation from March 2009 to May 18, 2017 and served as its Lead Independent Director from May 2016 to May 18, 2017. He served as a Director at eBay Inc. from January 2008 to July 17, 2015. He served as a Trustee of The Bridgespan Group, Inc., and other charitable organizations. He serves as a Member of the President's Export Council. Mr. Donahoe received a B.A. degree in Economics with high distinction, magna cum laude, Phi Beta Kappa from Dartmouth College and earned an M.B.A. from the Stanford University Graduate School of Business, where he was an Arjay Scholar.

CEO Compensation
  • John's compensation has increased whilst company is loss making.
  • No compensation data for John.
Management Team Tenure

Average tenure and age of the ServiceNow management team in years:

2.8
Average Tenure
52.4
Average Age
  • The tenure for the ServiceNow management team is about average.
Management Team

Michael Scarpelli

TITLE
Chief Financial Officer
COMPENSATION
$17M
AGE
50
TENURE
6.2 yrs

David Schneider

TITLE
Chief Revenue Officer
COMPENSATION
$17M
AGE
49
TENURE
3.3 yrs

CJ Desai

TITLE
Chief Product Officer
COMPENSATION
$50K
AGE
46
TENURE
0.8 yrs

John Donahoe

TITLE
Chief Executive Officer
AGE
56
TENURE
0.5 yrs

Chris Bedi

TITLE
Chief Information Officer

Robert Specker

TITLE
Vice President
TENURE
5.9 yrs

Dan Rogers

TITLE
Chief Marketing Officer
TENURE
1.3 yrs

Shelly Begun

TITLE
Senior Vice President of Human Resources
AGE
61

Dave Wright

TITLE
Chief Strategy Officer

Eric Clark

TITLE
Senior Vice President of Global Services
TENURE
1.3 yrs
Board of Directors Tenure

Average tenure and age of the ServiceNow board of directors in years:

4
Average Tenure
56.2
Average Age
  • The tenure for the ServiceNow board of directors is about average.
Board of Directors

Frank Slootman

TITLE
Chairman of the Board
COMPENSATION
$9M
AGE
58
TENURE
1 yrs

John Donahoe

TITLE
Chief Executive Officer
AGE
56
TENURE
0.5 yrs

Ron Codd

TITLE
Independent Director
COMPENSATION
$390K
AGE
62
TENURE
5.7 yrs

Jeff Miller

TITLE
Independent Director
COMPENSATION
$386K
AGE
66
TENURE
6.7 yrs

Sue Bostrom

TITLE
Independent Director
COMPENSATION
$377K
AGE
57
TENURE
3.3 yrs

Fred Luddy

TITLE
Director
COMPENSATION
$6M
AGE
62
TENURE
13.3 yrs

Anita Sands

TITLE
Independent Director
COMPENSATION
$380K
AGE
41
TENURE
3.3 yrs

Paul Chamberlain

TITLE
Independent Director
COMPENSATION
$226K
AGE
53
TENURE
1 yrs

Jonathan Chadwick

TITLE
Independent Director
COMPENSATION
$227K
AGE
51
TENURE
1 yrs
Recent Insider Trading
  • ServiceNow insiders have only sold shares in the past 3 months.
Who owns this company?
X
Management checks
We assess ServiceNow's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. ServiceNow has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

Company Info

Map
Description

ServiceNow, Inc. provides enterprise cloud computing solutions that define, structure, manage, and automate services for enterprises worldwide. The company offers service management solutions for customer support, human resources, security operations, and other enterprise departments. It operates ServiceNow platform that provides workflow, configuration management database, service catalog, service portal, knowledge management, reporting and analytics, data benchmarking, visual task boards, built-in and optional encryption capabilities, and collaboration and developer tools. The company also provides information technology (IT) solutions, such as IT service management product suite for enterprise’s employees, customers, and partners; IT operations management that connects a customer’s physical and cloud-based IT infrastructure with applications and platforms; and IT business management product suite that enables customers to manage their IT priorities. In addition, it offers customer service management product for customer service cases and requests; HR service management product; and security operation management product for security operations management requirements of third-party. Further, the company provides professional services, training services and certification programs, and customer support services. It serves enterprises in various industries, including financial services, consumer products, IT services, healthcare, and technology. The company sells products through its direct sales team, as well as indirectly through third-party channels by partnering with systems integrators, managed services providers, and resale partners. The company was formerly known as Service-now.com and changed its name to ServiceNow, Inc. in May 2012. ServiceNow, Inc. was founded in 2004 and is headquartered in Santa Clara, California with additional offices in North America, South America, Europe, and Asia.

Details
Name: ServiceNow, Inc.
Ticker: NOW
Exchange: NYSE
Founded: 2004
Market Cap: $20,616,899,471
Shares outstanding: 170,712,093
Website: www.servicenow.com
Address: ServiceNow, Inc.
2225 Lawson Lane,
Santa Clara,
California, 95054,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NYSE NOW Common Stock New York Stock Exchange US USD 29. Jun 2012
DB 4S0 Common Stock Deutsche Boerse AG DE EUR 29. Jun 2012
Number of employees
Current staff
Staff numbers
5,571
ServiceNow employees.
Industry
Industry: Systems Software
Sector: Software and Services