NOW Stock Study (2-21-26)

Posted by Mark on August 8, 2025 at 09:05 | Last modified: February 21, 2026 11:17

I recently did a stock study on ServiceNow, Inc. (NOW, $104.27).

M* writes:

     > ServiceNow Inc provides software solutions to structure and automate
     > various business processes via a SaaS delivery model. The company
     > primarily focuses on the IT function for enterprise customers.
     > ServiceNow began with IT service management, expanded within the
     > IT function, and more recently directed its workflow automation
     > logic to functional areas beyond IT, notably customer service,
     > HR service delivery, and security operations. ServiceNow also
     > offers an application development platform as a service.

Since 2019, this large-size company grows sales and EPS at annualized rates of 24.9% and 41.9%, respectively (’16-’18 excluded due negative earnings in two of three years). Lines are mostly up, straight, and narrowing except for EPS declines in ’20 and ’24. Seven- (Five-) year EPS R^2 is 0.51 (0.78). Value Line (VL) gives an Earnings Predictability score of 30. Shares outstanding increase 6.1% (1.0%/year).

Since 2019, PTPM trails peer and industry averages despite increasing from 1.9% to 17.0% (’25) with a last-5-year mean of 10.7%. ROE is about even with peer and industry averages despite falling from 42.2% to 15.5% (’25) with a last-5-year mean of 13.7%. Debt-to-Capital is less than peer and industry averages while falling from 34.7% to 15.6% (’25) with a last-5-year mean of 25.2%.

Quick Ratio is 0.85 and Interest Coverage 99.3 per M* who assigns “Wide” Economic Moat, gives “Exemplary” rating for Capital Allocation, but a B grade for Financial Health (BetterInvesting® website). VL rates the company A for Financial Strength.

With regard to sales growth:

• YF gives YOY ACE 20.1% and 18.5% for ’26 and ’27 (based on 41 analysts).
• Zacks gives YOY ACE 20.3% and 18.0% for ’26 and ’27, respectively (13 analysts).
• VL projects 13.8% annualized from ’24-’29.
• CFRA projects 20.8% YOY and 19.2% per year for ’26 and ’25-’27, respectively.
• M* offers a 2-year ACE of 19.1% and projects 17.0% per year x5 years (analyst report).

I am forecasting below the range at 13.0% per year.

With regard to EPS growth:

• MarketWatch projects 20.3% and 21.2% per year for ’25-’27 and ’25-’28, respectively (based on 47 analysts).
• Nasdaq.com gives ACE 25.4% YOY and 27.5%/year for ’27 and ’26-’28 (17 / 13 / 2 analysts for ’26 / ’27 / ’28).
• Seeking Alpha projects 4-year annualized growth of 23.6%.
• Argus projects 5-year annualized growth of 21.0%.
• Finviz gives ACE 5-year annualized growth of 20.6% (9).
• LSEG estimates LTG at 20.2%.
• YF gives YOY ACE 18.6% and 20.4% for ’26 and ’27, respectively (41).
• Zacks gives YOY ACE 17.7% and 19.6% for ’26 and ’27 (14) along with 5-year annualized growth of 23.9%.
• VL projects 26.3% annualized from ’24-’29.
• CFRA projects 19.4% YOY and 18.8% per year for ’26 and ’25-’27 along with 3-year CAGR of 17.0%.
• M* gives long-term ACE of 27.2% and projects 24.8% from ’25-’29 in Equity Report.

My 19.0% forecast is below the long-term-estimate range (mean of eight: 23.5%). Initial value is ’25 EPS of $1.67/share.

My Forecast High P/E is 53.0. Since 2019, three of seven are over 400 (highest 960). Excluding those as extreme, high P/E ranges from 85.6 in ’23 to 169 in ’24 with a last-5-year mean of 133 and last-5-year-mean average P/E of 103 (corresponding years excluded from low P/E calculation). I am below the range (and current P/E of 62.5).

My Forecast Low P/E is 35.0. Since 2019, three of seven are over 200 (highest 405). Excluding those as extreme, low P/E ranges from 42.0 in ’23 to 93.3 in ’24 with a last-5-year mean of 72.2. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) is $70.00. Default ($58.40) based on initial value from above seems unreasonably low at 44.0% less than the previous close and 40.4% less than the 52-week low. My [arbitrary] selection is 32.9% and 28.6% less, respectively. My Forecast Low P/E is effectively $70.00 / $1.67 = 41.9.

These inputs land NOW in the BUY zone with a U/D ratio of 3.2. Total Annualized Return (TAR) is 15.6%.

PAR (using Forecast Average—not High—P/E) of 11.2% is decent for a large-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 70 studies done in the past 90 days (my study and 18 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 17.1%, 20.1%, 76.0, and 50.0 respectively. I am lower across the board. VL [M*] projects a future average annual P/E of 50.0 [15.4—unreasonably low and I suspect they use current rather than future stock price] that is less than MS (63.0) and greater than mine (effectively 47.5).

MS high / low EPS are $4.16 / $1.67 versus my $3.99 / $1.67 (per share). My high EPS is less due to a lower growth rate. VL [M*] high EPS of $4.40 [$4.05] is higher than both [in the middle].

MS LSPF of $83.80 implies a Forecast Low P/E of 50.2, which is almost equal to the above-stated 50.0. MS LSPF is 19.7% greater than mine, however: much more aggressive.

MOS is robust in the study because my inputs are near or below historical/analyst/MS averages/ranges. Also backing this assessment are MS TAR exceeding mine by 5.1% per year and the greater LSPF.

Regarding valuation, PEG is 1.1 and 2.8 per Zacks and my projected P/E—slightly overvalued, perhaps (M* is undervalued at 0.89). Relative Value [(current P/E) / 5-year-mean average P/E] is quite low at 0.61. “Quick and Dirty DCF” calculates stock overvalued by ~23% (high projected CapEx).

Per U/D, NOW is a BUY under ~$106/share. BetterInvesting® TAR criterion would be met [215.5 / ((14.87 / 100 ) +1 ) ^ 5]
~ $108 given a forecast high price ~$216 (no dividend).

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