ServiceNow (NOW), mcap=$90bn, price $447 vs $444

$NOW pitch:
– High moat business expected to deliver 21-30% IRR over the next 4 years.
– Cheap relative to historical multiples.
– Cloud computing platform for enterprise workflow management.
– Extremely high 98-99% retention rate.
– Good unit economics with CAC payback in 21 months.
– Tuck-in acquisition expands service offering.
– Previous customer cohorts drastically expand their spending with $NOW over the years – e.g. 2010 cohort spending is up 21x.

– Since mid-2015 traded at 56-70x FCF multiple.
– Now at 39x and 31x next year’s FCF.
– Likely to sustain 30-40x multiple given top-line growth in the 20s and ROIC/ROE of 30-50%.

Exp. gain: 21-30% IRR over the next 4 years.

Full $NOW write-up (free guest account required):

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