SERVICENOW INC (NYSE:NOW) – A Strong Contender for Quality Investors

SERVICENOW INC (NYSE:NOW) stands out as a potential candidate for quality investors, based on our Caviar Cruise screening methodology. The company demonstrates strong historical growth, high profitability, and efficient capital allocation—key traits sought by investors focused on long-term holdings.

Key Strengths

• Revenue and EBIT Growth: Over the past five years, SERVICENOW has delivered consistent revenue growth, with a 19.47% CAGR. More impressively, EBIT growth has surged at a 100.47% CAGR, indicating expanding profitability.
• High ROIC: The company’s Return on Invested Capital (excluding cash and goodwill) stands at 26.54%, well above the 15% threshold for quality investments. This suggests efficient use of capital to generate profits.
• Strong Profit Quality: With a five-year average profit quality of 596.69%, SERVICENOW converts net income into free cash flow at an exceptional rate, reinforcing financial health.
• Low Debt Burden: A Debt-to-Free Cash Flow ratio of 0.41 means the company could repay its debt in less than six months using current cash flows, highlighting financial stability.

Fundamental Analysis Summary

Our fundamental report assigns SERVICENOW a rating of 6 out of 10, noting its excellent profitability and growth metrics. While the stock trades at a premium valuation (P/E of 69.56), this may be justified by its strong earnings growth outlook (20.36% expected annually). The company’s margins and ROIC outperform most peers, though liquidity ratios are slightly weaker than industry averages.

For investors seeking high-quality businesses with durable growth, SERVICENOW’s operational strength and financial discipline make it worth further consideration.

Our Caviar Cruise screener lists more quality stocks and is updated regularly.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.