U.S. Markets close in 5 hrs 42 mins
  • S&P 500

    3,712.37
    +19.14 (+0.52%)
     
  • Dow 30

    29,588.82
    -1.59 (-0.01%)
     
  • Nasdaq

    11,016.31
    +148.38 (+1.37%)
     
  • Russell 2000

    1,688.65
    +9.06 (+0.54%)
     
  • Crude Oil

    80.09
    +1.35 (+1.71%)
     
  • Gold

    1,652.90
    -2.70 (-0.16%)
     
  • Silver

    18.98
    +0.07 (+0.37%)
     
  • EUR/USD

    0.9666
    -0.0022 (-0.2320%)
     
  • 10-Yr Bond

    3.7810
    +0.0840 (+2.27%)
     
  • Vix

    30.81
    +0.89 (+2.97%)
     
  • GBP/USD

    1.0814
    -0.0042 (-0.3904%)
     
  • USD/JPY

    144.2260
    +0.9060 (+0.6321%)
     
  • BTC-USD

    19,186.26
    +283.00 (+1.50%)
     
  • CMC Crypto 200

    439.91
    +6.81 (+1.57%)
     
  • FTSE 100

    7,005.52
    -13.08 (-0.19%)
     
  • Nikkei 225

    26,431.55
    -722.28 (-2.66%)
     

Recent 6.6% pullback isn't enough to hurt long-term ServiceNow (NYSE:NOW) shareholders, they're still up 285% over 5 years

·3 min read

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. For instance, the price of ServiceNow, Inc. (NYSE:NOW) stock is up an impressive 285% over the last five years. It's down 6.6% in the last seven days.

In light of the stock dropping 6.6% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

See our latest analysis for ServiceNow

Given that ServiceNow only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last 5 years ServiceNow saw its revenue grow at 27% per year. Even measured against other revenue-focussed companies, that's a good result. So it's not entirely surprising that the share price reflected this performance by increasing at a rate of 31% per year, in that time. So it seems likely that buyers have paid attention to the strong revenue growth. To our minds that makes ServiceNow worth investigating - it may have its best days ahead.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling ServiceNow stock, you should check out this free report showing analyst profit forecasts.

A Different Perspective

We regret to report that ServiceNow shareholders are down 30% for the year. Unfortunately, that's worse than the broader market decline of 15%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 31% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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 1 warning sign with ServiceNow , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here