A Look at ServiceNow’s Balance Sheet and Financial Metrics


Oct. 18 2018, Updated 7:32 a.m. ET

ServiceNow might achieve GAAP profitability in 2019

While we’ve seen ServiceNow’s (NOW) exponential revenue and earnings growth over the last few years, it hasn’t posted GAAP profit yet. Analysts expect a GAAP net margin of -2% in 2018. However, it might improve to 0.6% in 2019 and 3.6% in 2020.

Given the high growth rates for ServiceNow, it trades at high valuation multiples. It has a market-cap-to-revenue ratio of 12.6x in 2018 and an enterprise-value-to-EBITDA of 47.3x.

ServiceNow’s expected operating margin for 2018 is 20.1%, with an operating leverage of 1.91x. Its return on equity is estimated to be 42% for 2018. We can see in the above chart that ServiceNow has managed to improve its operating margin from 16% in 2016 to 18% in 2017.

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Debt of $857 million

ServiceNow has a debt of $857.13 million and a cash balance of $1.75 billion, which is more than enough to cover interest payments and debt obligations. At the end of the second quarter, ServiceNow had an operating cash flow of $702.47 million and levered cash flow of $740.6 million.

Its free cash flow margin has risen from 23% in 2016 to 26% in 2017.


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