Yahoo Finance When Will ServiceNow, Inc. (NYSE:NOW) Turn A Profit?
ServiceNow, Inc.'s (NYSE:NOW): ServiceNow, Inc. provides enterprise cloud computing solutions that define, structure, manage, and automate services for enterprises worldwide. The US$43b market-cap company announced a latest loss of -US$26.7m on 31 December 2018 for its most recent financial year result. The most pressing concern for investors is NOW’s path to profitability – when will it breakeven? Below I will provide a high-level summary of the industry analysts’ expectations for NOW.
See our latest analysis for ServiceNow
Consensus from the 34 Software analysts is NOW is on the verge of breakeven. They expect the company to post a final loss in 2019, before turning a profit of US$237m in 2020. NOW is therefore projected to breakeven around a few months from now. In order to meet this breakeven date, I calculated the rate at which NOW must grow year-on-year. It turns out an average annual growth rate of 88% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, NOW may become profitable much later than analysts predict.
Given this is a high-level overview, I won’t go into details of NOW’s upcoming projects, though, keep in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing I would like to bring into light with NOW is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in NOW’s case is 60%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
Next Steps:
There are key fundamentals of NOW which are not covered in this article, but I must stress again that this is merely a basic overview. For a more comprehensive look at NOW, take a look at NOW’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further research:
Valuation: What is NOW worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether NOW is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on ServiceNow’s board and the CEO’s back ground.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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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.
