ServiceNow Proves to Be a Stellar Growth Equity: Here Are 3 Reasons

Growth-focused investors constantly seek companies displaying robust financial growth, as this characteristic often leads to better market performance and impressive returns. Nevertheless, identifying a true growth stock can be both challenging and fraught with risk, especially when growth prospects are dwindling or the stock's growth phase is concluding.

Assessing ServiceNow's Growth Prospects

Despite the general risks associated with growth stocks, certain companies like ServiceNow stand out with sound growth metrics. Utilizing systems like the Zacks Growth Style Score, it's possible to look past traditional growth markers and appraise a company's genuine growth potential.

Currently, ServiceNow presents an appealing profile with a strong Growth Score as well as holding a superior Zacks Rank, painting a picture of a company poised for continuous growth.

Why ServiceNow is Geared for Growth

When dissecting what makes a growth stock truly exceptional, three core components emerge as key indicators: earnings growth, cash flow expansion, and positive earnings estimate revisions.

Earnings Growth

A crucial element of a growth stock is its potential for earnings expansion. ServiceNow has displayed a historical EPS growth rate of 60.6%. However, it's the forecasted growth rate that's most compelling, with projections indicating a 25.4% increase in EPS this year, surpassing the industry's expected growth of 12.5%.

Cash Flow Growth

Moreover, the lifeblood of a company, its cash flow, is especially pertinent for growth-centric firms. ServiceNow's cash flow growth is impressive at 33%, significantly eclipsing its peers and greatly outpacing the industry average decline of -13.4%. The company's annualized cash flow growth rate over the past 3-5 years supports this strength, with a rate of 33.5% compared to the industry's 8%.

Promising Earnings Estimate Revisions

Favorable earnings estimate revisions further substantiate the stock's credentials. A positive trend in estimates often correlates with short-term stock price movements. ServiceNow has seen its current-year earnings estimates increase recently, with the Zacks Consensus Estimate having risen by 5.4% in the past month.

Conclusion

ServiceNow not only exhibits a top-tier Growth Score of A but also carries a Zacks Rank #2 reflecting positive earnings estimate revisions. This fusion of factors suggests that ServiceNow stands as a compelling investment for growth investors and could very well outpace the market.

Growth, Financials, ServiceNow