A Look at ServiceNow’s Balance Sheet and Financial Metrics

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.

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.