We assign a fundamental rating of 5 out of 10 to NOW. NOW was compared to 278 industry peers in the Software industry. NOW scores excellent on profitability, but there are some minor concerns on its financial health. NOW is not valued too expensively and it also shows a decent growth rate.

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

NOW had positive earnings in the past year.
NOW had a positive operating cash flow in the past year.
Of the past 5 years NOW 4 years were profitable.
NOW had a positive operating cash flow in 4 of the past 5 years.

1.2 Ratios

NOW has a Return On Assets of 7.94%. This is amongst the best in the industry. NOW outperforms 80.22% of its industry peers.
NOW has a Return On Equity of 15.32%. This is amongst the best in the industry. NOW outperforms 82.73% of its industry peers.
The Return On Invested Capital of NOW (10.34%) is better than 85.61% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for NOW is below the industry average of 10.76%.
The 3 year average ROIC (6.51%) for NOW is below the current ROIC(10.34%), indicating increased profibility in the last year.

		Industry Rank	Sector Rank
ROA	7.94%
ROE	15.32%
ROIC	10.34%

ROA(3y)6.46%

ROA(5y)4.58%

ROE(3y)14.66%

ROE(5y)10.88%

ROIC(3y)6.51%

ROIC(5y)5.28%

1.3 Margins

NOW's Profit Margin of 13.67% is fine compared to the rest of the industry. NOW outperforms 75.54% of its industry peers.
NOW's Profit Margin has declined in the last couple of years.
With an excellent Operating Margin value of 13.85%, NOW belongs to the best of the industry, outperforming 80.58% of the companies in the same industry.
In the last couple of years the Operating Margin of NOW has grown nicely.
With a decent Gross Margin value of 78.05%, NOW is doing good in the industry, outperforming 75.90% of the companies in the same industry.
NOW's Gross Margin has been stable in the last couple of years.

		Industry Rank	Sector Rank
OM	13.85%
PM (TTM)	13.67%
GM	78.05%

OM growth 3Y41.76%

OM growth 5Y59.12%

PM growth 3Y49.27%

PM growth 5Y-6.45%

GM growth 3Y0.91%

GM growth 5Y0.57%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), so NOW is destroying value.
There is no outstanding debt for NOW. This means it has a Debt/Equity and Debt/FCF ratio of 0 and it is amongst the best of the sector and industry.

2.2 Solvency

NOW has an Altman-Z score of 2.72. This is not the best score and indicates that NOW is in the grey zone with still only limited risk for bankruptcy at the moment.
NOW's Altman-Z score of 2.72 is in line compared to the rest of the industry. NOW outperforms 58.63% of its industry peers.
The Debt to FCF ratio of NOW is 0.38, which is an excellent value as it means it would take NOW, only 0.38 years of fcf income to pay off all of its debts.
With a decent Debt to FCF ratio value of 0.38, NOW is doing good in the industry, outperforming 79.50% of the companies in the same industry.
A Debt/Equity ratio of 0.13 indicates that NOW is not too dependend on debt financing.
NOW has a Debt to Equity ratio (0.13) which is comparable to the rest of the industry.

		Industry Rank	Sector Rank
Debt/Equity	0.13
Debt/FCF	0.38
Altman-Z	2.72

ROIC/WACC0.95

WACC10.88%

2.3 Liquidity

A Current Ratio of 1.06 indicates that NOW should not have too much problems paying its short term obligations.
Looking at the Current ratio, with a value of 1.06, NOW is doing worse than 71.22% of the companies in the same industry.
NOW has a Quick Ratio of 1.06. This is a normal value and indicates that NOW is financially healthy and should not expect problems in meeting its short term obligations.
NOW's Quick ratio of 1.06 is on the low side compared to the rest of the industry. NOW is outperformed by 70.50% of its industry peers.

		Industry Rank	Sector Rank
Current Ratio	1.06
Quick Ratio	1.06

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WACC

Debt/Equity

How to determine the health of a company

Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has grown by an impressive 25.99% over the past year.
The Earnings Per Share has been growing by 30.37% on average over the past years. This is a very strong growth

EPS 1Y (TTM)25.99%

EPS 3Y32.23%

EPS 5Y30.37%

EPS Q2Q%25.34%

Revenue 1Y (TTM)N/A

Revenue growth 3YN/A

Revenue growth 5YN/A

Sales Q2Q%20.66%

3.2 Future

The Earnings Per Share is expected to grow by 16.42% on average over the next years. This is quite good.
Based on estimates for the next years, NOW will show a quite strong growth in Revenue. The Revenue will grow by 17.38% on average per year.

EPS Next Y17.51%

EPS Next 2Y18.71%

EPS Next 3Y97.87%

EPS Next 5Y16.42%

Revenue Next Year18.62%

Revenue Next 2Y18.61%

Revenue Next 3Y17.5%

Revenue Next 5Y17.38%

3.3 Evolution

Although the future EPS growth is still strong, it is not able to hold up the even more excellent growth rate of the past years.

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4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 33.26, which means the current valuation is very expensive for NOW.
NOW's Price/Earnings is on the same level as the industry average.
When comparing the Price/Earnings ratio of NOW to the average of the S&P500 Index (28.60), we can say NOW is valued inline with the index average.
With a Price/Forward Earnings ratio of 28.30, NOW can be considered very expensive at the moment.
Compared to the rest of the industry, the Price/Forward Earnings ratio of NOW is on the same level as its industry peers.
The average S&P500 Price/Forward Earnings ratio is at 25.83. NOW is around the same levels.

		Industry Rank	Sector Rank
PE	33.26
Fwd PE	28.3

4.2 Price Multiples

90.65% of the companies in the same industry are more expensive than NOW, based on the Enterprise Value to EBITDA ratio.
95.68% of the companies in the same industry are more expensive than NOW, based on the Price/Free Cash Flow ratio.

		Industry Rank	Sector Rank
P/FCF	6.2
EV/EBITDA	8.33

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates NOW does not grow enough to justify the current Price/Earnings ratio.
The decent profitability rating of NOW may justify a higher PE ratio.
A more expensive valuation may be justified as NOW's earnings are expected to grow with 97.87% in the coming years.