Understanding ServiceNow's Position In Software Industry Compared To Competitors
ServiceNow, Inc. NOW | 1098.37 | -0.65% |
In the dynamic and cutthroat world of business, conducting thorough company analysis is essential for investors and industry experts. In this article, we will undertake a comprehensive industry comparison, evaluating ServiceNow (NYSE:NOW) and its primary competitors in the Software industry. By closely examining key financial metrics, market position, and growth prospects, our aim is to provide valuable insights for investors and shed light on company's performance within the industry.
ServiceNow Background
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.
| Company | P/E | P/B | P/S | ROE | EBITDA (in billions) | Gross Profit (in billions) | Revenue Growth |
|---|---|---|---|---|---|---|---|
| ServiceNow Inc | 145.33 | 20.72 | 18.52 | 4.81% | $0.67 | $2.21 | 22.25% |
| Microsoft Corp | 33.55 | 10.50 | 11.94 | 8.87% | $38.23 | $45.49 | 16.04% |
| Oracle Corp | 43.26 | 43 | 8.83 | 30.01% | $5.44 | $9.4 | 6.86% |
| Palo Alto Networks Inc | 49.48 | 22.80 | 15.89 | 7.42% | $0.39 | $1.62 | 12.09% |
| CrowdStrike Holdings Inc | 430.20 | 25.50 | 20.96 | 1.75% | $0.12 | $0.73 | 31.74% |
| Fortinet Inc | 46.53 | 208.72 | 11.02 | 504.05% | $0.5 | $1.16 | 10.95% |
| Gen Digital Inc | 29.40 | 8.54 | 4.76 | 7.92% | $0.54 | $0.78 | 0.93% |
| Monday.Com Ltd | 358.38 | 16.10 | 17.53 | 1.62% | $0.0 | $0.21 | 34.4% |
| Dolby Laboratories Inc | 33.44 | 2.86 | 5.65 | 1.58% | $0.06 | $0.25 | -3.2% |
| CommVault Systems Inc | 39.64 | 24.59 | 7.85 | 5.56% | $0.02 | $0.18 | 3.83% |
| Qualys Inc | 26.32 | 10.26 | 7.72 | 10.52% | $0.05 | $0.12 | 8.38% |
| Teradata Corp | 50.36 | 41.30 | 1.80 | 57.36% | $0.09 | $0.27 | -5.63% |
| Progress Software Corp | 34.45 | 6.46 | 3.97 | 6.88% | $0.06 | $0.15 | 2.11% |
| N-able Inc | 67.94 | 3.13 | 5.10 | 1.32% | $0.03 | $0.1 | 12.6% |
| Average | 95.61 | 32.6 | 9.46 | 49.6% | $3.5 | $4.65 | 10.08% |
After thoroughly examining ServiceNow, the following trends can be inferred:
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At 145.33, the stock's Price to Earnings ratio significantly exceeds the industry average by 1.52x, suggesting a premium valuation relative to industry peers.
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Considering a Price to Book ratio of 20.72, which is well below the industry average by 0.64x, the stock may be undervalued based on its book value compared to its peers.
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With a relatively high Price to Sales ratio of 18.52, which is 1.96x the industry average, the stock might be considered overvalued based on sales performance.
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The Return on Equity (ROE) of 4.81% is 44.79% below the industry average, suggesting potential inefficiency in utilizing equity to generate profits.
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The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $670 Million is 0.19x below the industry average, suggesting potential lower profitability or financial challenges.
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With lower gross profit of $2.21 Billion, which indicates 0.48x below the industry average, the company may experience lower revenue after accounting for production costs.
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The company's revenue growth of 22.25% exceeds the industry average of 10.08%, indicating strong sales performance and market outperformance.
Debt To Equity Ratio
The debt-to-equity (D/E) ratio is a financial metric that helps determine the level of financial risk associated with a company's capital structure.
Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.
When evaluating ServiceNow alongside its top 4 peers in terms of the Debt-to-Equity ratio, the following insights arise:
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ServiceNow is in a relatively stronger financial position compared to its top 4 peers, as evidenced by its lower debt-to-equity ratio of 0.24.
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This implies that the company relies less on debt financing and has a more favorable balance between debt and equity.
Key Takeaways
For ServiceNow in the Software industry, the PE ratio is high compared to peers, indicating potential overvaluation. The PB ratio is low, suggesting the stock may be undervalued based on its book value. The PS ratio is high, signaling rich valuation relative to sales. In terms of ROE, EBITDA, gross profit, and revenue growth, ServiceNow lags behind its industry peers, reflecting lower profitability and growth potential.
This article was generated by Benzinga's automated content engine and reviewed by an editor.
