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At US$263, Is ServiceNow, Inc. (NYSE:NOW) Worth Looking At Closely?

Simply Wall St

Today we're going to take a look at the well-established ServiceNow, Inc. (NYSE:NOW). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $302.31 at one point, and dropping to the lows of $248.38. 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 $263.38 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.

Check out our latest analysis for ServiceNow

What's the opportunity in ServiceNow?

According to my valuation model, ServiceNow seems to be fairly priced at around 11.79% above my intrinsic value, which means if you buy ServiceNow today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $235.61, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since ServiceNow’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of ServiceNow look like?

NYSE:NOW Past and Future Earnings, September 4th 2019

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for ServiceNow. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in NOW’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

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

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on ServiceNow. You can find everything you need to know about ServiceNow in the latest infographic research report. If you are no longer interested in ServiceNow, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.