ServiceNow is a high growth company. In this article, we’ll compare ServiceNow’s (NOW) valuation with other high growth tech firms such as Okta (OKTA), Splunk (SPLK) and Roku (ROKU). ServiceNow is slated to achieve GAAP profitability in fiscal 2020, and the company has a forward 2020 PE ratio of 265x. This valuation is very high considering its revenue growth of 28% and earnings growth of 38%. The forward PE ratio will likely stabilize over the next few years as the company expands profit margins. For now, ServiceNow will have to grow its bottom line and continue to beat Wall Street analysts’ estimates to keep investors interested.
Market cap to revenue
ServiceNow is valued at $43 billion, which is 12.6x sales for 2019. This metric is lower than Okta’s at 19.4x sales, but higher than Splunk (SPLK) and Roku (ROKU), which are valued at 8.71x and 6.29x, respectively. Okta, Splunk, and Roku are estimated to grow sales by 34%, 23%, and 37%, respectively, in their current fiscal year.
ServiceNow’s (NOW) price-to-book ratio of 23.2x is lower than Okta’s 64.3x and Roku’s 30.0x, but higher than Splunk’s 10.7x.
ServiceNow has the highest operating margin among its peers at 21.2%. Okta’s, Splunk’s, and Roku’s operating margins are low in comparison at -12%, 14%, and -7.9%, respectively. ServiceNow, leads with a net margin of -0.2% compared to -31.3% for Okta, -11% for Splunk, and -7.6% for TTWO.
ROA and ROE
ServiceNow’s ROA (return on assets) is the highest among these peers at 8.6%, while its return on equity stands at 40.6%. Okta, Splunk, and Roku have ROAs of -20.5%, 2.1%, and -18.3%, respectively.