ServiceNow Stock: Join the Rally at a 55% Discount

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 stock is now 55% 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. ServiceNow’s Q4 2025 results showcased strong subscription revenue, anchored by a 98% customer renewal rate and 244 deals over $1 million in net new annual contract value. The Now Assist AI suite more than doubled its net new ACV, contributing over $600 million, reflecting successful pricing power and advanced product adoption. Remaining performance obligations grew to $28.2 billion, offering clear future revenue visibility. For 2026, the company anticipates a 36% free cash flow margin, a notable increase from prior targets, signaling enhanced cash generation. Acquisitions like Moveworks, Armis, and Veza are further expanding the platform, fortifying its competitive position.

NOW Has Strong Fundamentals

• Recent Profitability: Nearly 41.0% operating cash flow margin and 13.7% operating margin LTM.
• Long-Term Profitability: About 39.2% operating cash flow margin and 11.5% operating margin last 3-year average.
• Revenue Growth: ServiceNow saw growth of 20.9% LTM and 22.4% for the last 3-year average, but this is not a growth story
• Available At Discount: At P/S multiple of 8.7, NOW stock is available at a 55% 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. T-Mobile US (TMUS)
2. Salesforce (CRM)
3. Abbott Laboratories (ABT)

Notably, a portfolio that was built starting 12/31/2016 with stocks that fulfill 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%

Stock Picking Falls Short Against Multi Asset Portfolios

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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