Even though ServiceNow (NYSE:NOW) has lost US$3.7b market cap in last 7 days,

When you buy shares in a company, it’s worth keeping in mind the possibility that it could fail, and you could lose your money. But when you pick a company that is really flourishing, you can make more than 100%. For example, the ServiceNow, Inc. (NYSE:NOW) share price has soared 194% in the last half decade. Most would be very happy with that. On top of that, the share price is up 27% in about a quarter. This could be related to the recent financial results, released recently – you can catch up on the most recent data by reading our company report.

Although ServiceNow has shed US$3.7b from its market cap this week, let’s take a look at its longer term fundamental trends and see if they’ve driven returns.

View our latest analysis for ServiceNow

To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the last half decade, ServiceNow became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it’s worth taking a look at the returns in the last three years, too. Indeed, the ServiceNow share price has gained 28% in three years. Meanwhile, EPS is up 22% per year. This EPS growth is higher than the 9% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days. Of course, with a P/E ratio of 79.13, the market remains optimistic.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that ServiceNow has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

It’s good to see that ServiceNow has rewarded shareholders with a total shareholder return of 11% in the last twelve months. However, the TSR over five years, coming in at 24% per year, is even more impressive. Potential buyers might understandably feel they’ve missed the opportunity, but it’s always possible business is still firing on all cylinders. 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. Case in point: We’ve spotted 2 warning signs for ServiceNow you should be aware of, and 1 of them is concerning.

Of course ServiceNow may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.