The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For instance, the price of ServiceNow, Inc. (NYSE:NOW) stock is up an impressive 253% over the last five years. It's also good to see the share price up 16% over the last quarter.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over half a decade, ServiceNow managed to grow its earnings per share at 103% a year. The EPS growth is more impressive than the yearly share price gain of 29% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. Having said that, the market is still optimistic, given the P/E ratio of 165.82.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that ServiceNow has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
A Different Perspective
It's nice to see that ServiceNow shareholders have received a total shareholder return of 54% over the last year. That gain is better than the annual TSR over five years, which is 29%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand ServiceNow better, we need to consider many other factors. For example, we've discovered 2 warning signs for ServiceNow that you should be aware of before investing here.
We will like ServiceNow better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.