ServiceNow Stock Pullback: A Chance to Ride the Uptrend

ServiceNow (NOW) stock might be a good buy now. Why? Because you get high margins – reflective of pricing power and cash generation capacity – for a discounted price. Companies like this generate consistent, predictable profits and cash flows, which reduce risk and allow capital to be reinvested. The market tends to reward that.

What Is Happening With NOW

NOW may be down -3.7% so far this year, but the silver lining is that it is now 42% cheaper based on its P/S (Price-to-Sales) ratio compared to 1 year ago.

The stock may not reflect it yet, but here is what’s going well for the company. Q3 2025 saw over 100 transactions exceeding $1 million in net new annual contract value, with 553 customers now generating over $5 million in annual spend. Current remaining performance obligations grew 21% to $11.35 billion, providing strong revenue visibility. A 97% renewal rate underlines customer reliance, while accelerating AI product adoption is on track for $1 billion in annual contract value by FY2026. Despite earlier foreign exchange headwinds impacting 2025 subscription revenue guidance, the company raised its full-year free cash flow margin outlook.

NOW Has Strong Fundamentals

• Recent Profitability: Nearly 38.2% operating cash flow margin and 13.9% operating margin LTM.
• Long-Term Profitability: About 37.9% operating cash flow margin and 11.2% operating margin last 3-year average.
• Revenue Growth: ServiceNow saw growth of 21.1% LTM and 22.3% last 3-year average, but this is not a growth story
• Available At Discount: At P/S multiple of 12.1, NOW stock is available at a 42% discount vs 1 year ago.

Below is a quick comparison of NOW fundamentals with S&P medians.

*LTM: Last Twelve Months

Don’t Expect A Slam Dunk, Though

While NOW stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. This stock fell 27% during the 2018 correction, 30% in the Covid pandemic sell-off, and over 50% in the inflation shock. Even with solid fundamentals, these dips show it’s not immune when the market turns sour. Downturns hit hard, and such pullbacks are part of the risk picture. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read NOW Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

If you want more details, read Buy or Sell NOW Stock.

How We Arrived At NOW Stock

NOW piqued our interest because it meets the following criteria:

1. Greater than $10 Bil in market cap
2. High CFO (cash flow from operations) margins or operating margins
3. Meaningfully declined in valuation over the past 1 year

But if NOW doesn’t look good enough to you, here are other stocks that also check all these boxes:

1. Visa (V)
2. Salesforce (CRM)
3. Adobe (ADBE)

Notably, a portfolio that was built starting 12/31/2016 with stocks that fulfil the criteria above would have performed as follows:

• Average 12-month forward returns of nearly 19%
• 12-month win rate (percentage of picks returning positive) of about 72%

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Stocks soar and sink but bonds commodities and other assets balance the ride. A multi asset portfolio keeps returns steadier and reduces single market risk.

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