Stock Analysis

Investors in ServiceNow (NYSE:NOW) have seen strong returns of 236% over the past five years

NYSE:NOW
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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the ServiceNow, Inc. (NYSE:NOW) share price has soared 236% in the last half decade. Most would be very happy with that. On top of that, the share price is up 12% in about a quarter.

Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for ServiceNow

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, ServiceNow achieved compound earnings per share (EPS) growth of 103% per year. This EPS growth is higher than the 27% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. Having said that, the market is still optimistic, given the P/E ratio of 162.01.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
NYSE:NOW Earnings Per Share Growth January 10th 2025

It is of course excellent to see how ServiceNow has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at ServiceNow's financial health with this free report on its balance sheet.

A Different Perspective

We're pleased to report that ServiceNow shareholders have received a total shareholder return of 44% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 27% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with ServiceNow , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.