The problem with reading (and writing) about Microsoft (MSFT) is that we all understand the company ...
ServiceNow: Success in the Cloud
11/16/2016 9:00 am EST
This firm’s cloud software isn’t something that most people will ever hear of, but for thousands of businesses (including 705 of the Global 2000), it’s become a vital tool to radically boost worker productivity, explains Mike Cintolo, growth stock expert and editor of Cabot Growth Investor.
ServiceNow (NOW) takes a service-oriented approach to organizing and communicating the countless day-to-day requests from employees and suppliers.
We’ve been following ServiceNow for a few years and even owned it once (back in early 2014).
It got its start with IT departments (handling the never-ending stream of help requests for technology snafus), but now it’s branched into numerous other areas.
Customers love it — not only are accounts growing, but once they come, they stick around (renewal rates are usually north of 95% and were 99% in the third quarter) and buy more (69% of customers use more than one of ServiceNow’s offerings, up from 59% a year ago).
That’s led to great sales, earnings and cash flow growth (all north of 30% annually), and management expects that growth rate to continue at least through 2020, when free cash flow could total north of $6 per share according to some analysts.
In the intermediate-term, analysts see earnings rising 50% next year as more and more of the recurring revenue falls to the bottom line.
After consolidating for many months, the stock has come alive following its third-quarter report two weeks ago.
There’s still a little overhead resistance from a year ago, but we’re more impressed with the fact that the stock has held most of its earnings gains when the market had gone haywire. We're buying a position in NOW in our Model Portfolio.
By Mike Cintolo, Editor of Cabot Growth Investor
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