Stock Analysis

Why ServiceNow, Inc. (NYSE:NOW) Could Be Worth Watching

NYSE:NOW
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ServiceNow, Inc. (NYSE:NOW) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$606 at one point, and dropping to the lows of US$541. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether ServiceNow's current trading price of US$543 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at ServiceNow’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for ServiceNow

What's The Opportunity In ServiceNow?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.3% below my intrinsic value, which means if you buy ServiceNow today, you’d be paying a fair price for it. And if you believe the company’s true value is $598.34, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because ServiceNow’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of ServiceNow look like?

earnings-and-revenue-growth
NYSE:NOW Earnings and Revenue Growth October 23rd 2023

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of ServiceNow, it is expected to deliver a relatively unexciting earnings growth of 6.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? NOW’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on NOW, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. When we did our research, we found 2 warning signs for ServiceNow (1 is concerning!) that we believe deserve your full attention.

If you are no longer interested in ServiceNow, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.