NOW 760.13 (-1.01%)
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Last update on 2024-06-05

ServiceNow (NOW) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

ServiceNow (NOW) achieves a Piotroski F-Score of 6/9. The analysis helps investors assess profitability, liquidity, and efficiency for the year 2023.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 6

We're running ServiceNow (NOW) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

The Piotroski F-Score is a metric that looks at 9 different areas of a company's financial health, like profitability, liquidity, and operating efficiency. ServiceNow (NOW) scored a 6 out of 9, which suggests it's in pretty good shape financially. They've turned things around with positive net income and cash flow, an increasing ROA, and lower leverage. However, there are a few areas where they didn't perform as well, like their current ratio, share dilution, and asset turnover. Overall, the score shows steady profitability and efficient operations but also highlights some areas that need attention.

Insights for Value Investors Seeking Stable Income

ServiceNow has some strong financial indicators, making it an interesting option for investors. With a Piotroski Score of 6, it's above average but not perfect, suggesting both strengths and room for improvement. The positive net income, increasing ROA, and robust cash flows make it a promising candidate, but potential investors should also consider the declining current ratio and ongoing share dilution. Further research, especially into why asset turnover has dipped, would be prudent before making any investment decisions.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of ServiceNow (NOW)

Company has a positive net income?

The Net Income criterion examines whether a company has achieved a positive net income within the fiscal year.

Historical Net Income of ServiceNow (NOW)

ServiceNow (NYSE: NOW) has demonstrated notable financial improvement over the past two decades. Historically, the company struggled with net losses, illustrated by figures such as -$297.05 million in 2009 and the nadir of -$451.80 million in 2016. Over recent years, ServiceNow has shown a considerable turnaround, culminating in a positive net income of $1.731 billion in 2023. This positive net income adds 1 point to the Piotroski score, reflecting a good trend with consistent improvement in profitability. This shift bolsters investor confidence in ServiceNow's ongoing financial health and operational efficiency.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated or consumed by a firm's core business operations. It is crucial to assess financial health.

Historical Operating Cash Flow of ServiceNow (NOW)

ServiceNow (NOW) has demonstrated positive cash flow from operations, recording $3.398 billion in 2023. This signifies financial robustness and effective core business operations. Historically, ServiceNow's operating cash flows have shown a considerable improvement from negative and negligible values in its early years to consistently strong figures in recent years, indicating a positive trend. Points earned: 1.

Return on Assets (ROA) are growing?

ROA is a measure of how efficiently a company is using its assets to generate profitability. An increasing ROA indicates improved management efficiency.

Historical change in Return on Assets (ROA) of ServiceNow (NOW)

In 2023, ServiceNow (NOW) reported an ROA of 0.1128, up significantly from 0.027 in 2022. This notable increase in ROA suggests a substantial improvement in asset utilization efficiency. Such a trend is highly positive as it indicates that the company has managed to generate higher profit per dollar of assets compared to the previous year. Drawing from historical data, ServiceNow has shown a steady improvement in their ROA over the past 20 years, culminating in this recent rise. Despite the improvement, it is still below the industry's median ROA of 0.6741 in 2023, which points to potential for further efficiency gains. Nonetheless, the increase from the previous year is a positive sign for investors as it reflects operational enhancements within the company.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income. This criterion evaluates whether a company's main business is generating real cash rather than just accounting profits.

Historical accruals of ServiceNow (NOW)

In 2023, ServiceNow's operating cash flow was $3,398,000,000, significantly higher than its net income of $1,731,000,000. This observation is positive since it indicates that the company is generating strong cash flows from its core operations, which means its earnings are of high quality. Historical data shows an uptrend in operating cash flow over the years, growing from negative or very low amounts in the early 2000s to substantial figures in the recent years. Net income also experienced robust growth, especially post-2019. This trend adds credibility to ServiceNow’s financial health, earning a point for this criterion.

Liquidity of ServiceNow (NOW)

Leverage is declining?

Change in Leverage refers to the difference in the company's financial leverage ratio from one period to the next. It indicates the company's ability to meet its fixed financial obligations.

Historical leverage of ServiceNow (NOW)

In the case of ServiceNow (NOW), the leverage ratio decreased from 0.1606 in 2022 to 0.1262 in 2023. This drop in leverage ratio is considered positive as it suggests that the company has reduced its dependence on debt to finance its operations. A lower leverage ratio indicates lower financial risk for ServiceNow and enhances its ability to meet financial obligations. Over the past two decades, ServiceNow's leverage ratios have shown periods of fluctuation, but the trend from 2022 to 2023 is notably positive.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. A higher current ratio indicates greater liquidity and financial health.

Historical Current Ratio of ServiceNow (NOW)

In 2023, ServiceNow's current ratio was 1.0559, slightly down from 1.1081 in 2022. This decline points to a slight decrease in liquidity. Comparing the trend over a longer period from 2006 to 2023, ServiceNow's current ratios have generally hovered around 1-1.5, which signals moderate liquidity. However, it's worth noting that the industry median has consistently been higher, ranging from around 1.56 to 1.94. Hence, ServiceNow's current ratio is below the industry median, indicating potential liquidity concerns compared to its peers. Overall, given the slight dip, no point is added for this criterion this year.

Number of shares not diluted?

Outstanding Shares refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by company insiders.

Historical outstanding shares of ServiceNow (NOW)

For the year 2022, ServiceNow reported 201 million outstanding shares, which increased to 204 million shares in 2023. This marks an increase in outstanding shares. According to the Piotroski criterion, an increase in outstanding shares is generally seen as negative because it may dilute shareholder value if the company is issuing new shares instead of performing stock buybacks. Therefore, ServiceNow will receive a score of 0 in this particular criterion. Additionally, looking at the last 20 years, the trend shows a general increase in outstanding shares, from 120.3 million in 2006 to 204 million in 2023, showing a pattern of continual dilutive activities.

Operating of ServiceNow (NOW)

Cross Margin is growing?

Gross Margin measures the percentage of revenue that exceeds the cost of goods sold. It is crucial as it reflects the core profitability of the company's products and services.

Historical gross margin of ServiceNow (NOW)

The Gross Margin for ServiceNow has increased from 0.7829 in 2022 to 0.7859 in 2023, reflecting a positive trend in terms of profitability. This improvement, however slight, indicates enhanced efficiency in managing production costs relative to revenue. Comparatively, ServiceNow's gross margin is significantly higher than the industry median (0.6741 in 2023), which underscores its competitive advantage in the market. Additionally, this positive trend aligns with a general upward trajectory observed over the last 20 years, indicating robustness in ServiceNow's business model.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate revenue.

Historical asset turnover ratio of ServiceNow (NOW)

Comparing the Asset Turnover ratio of 0.5847 in 2023 with 0.6013 in 2022 reveals a decline. This decrease indicates that ServiceNow's efficiency in leveraging its assets to generate revenue has slightly worsened. Historically, ServiceNow's asset turnover has shown substantial variations, peaking at 1.687 in 2009 and reducing to sub-1.0 levels afterward. The dip from 2022 to 2023 might warrant further scrutiny to understand the underlying factors affecting asset efficiency. Overall, the trend for 2023 is not positive, thus adding 0 points.


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