ServiceNow Inc. (NOW) Stock Evaluation

ServiceNow Inc. is a leading American software company. It specializes in cloud-based solutions for digital workflows, helping organizations automate and streamline their business processes. Its flagship product, the Now Platform, integrates AI, machine learning, and low-code development tools to enhance IT service management, customer service, and operational efficiency. Founded in 2004, ServiceNow serves a diverse range of industries, including government, healthcare, financial services, and technology, with a strong focus on innovation and sustainability.

Sustainability Criteria

Environmental Criteria (30%)

1. Energy Efficiency & Data Centers (5/5): ServiceNow maintains 100% renewable electricity and has achieved carbon neutrality, including a carbon-neutral cloud.

2. E-Waste & Product Lifecycle (4/5): The company emphasizes responsible procurement and waste reduction but could provide more details on product lifecycle initiatives.

3. Carbon Emissions & Climate Strategy (5/5): ServiceNow is committed to net-zero emissions by 2030 and has science-based targets for reducing greenhouse gas emissions.

Social Criteria (30%)

1. Data Privacy & Consumer Protection (5/5): ServiceNow prioritizes robust data privacy and security measures for its clients and stakeholders.

2. Labor Practices & Diversity (4/5): The company promotes diversity, equity, and inclusion, with initiatives to create equitable opportunities.

3. Impact of Products on Society (5/5): ServiceNow’s technology solutions improve operational efficiency and societal outcomes, such as digital transformation for public services.

Governance Criteria (40%)

1. Board Structure & Independence (5/5): ServiceNow has a transparent and independent board with strong oversight of ESG issues.

2. Transparency & ESG Reporting (5/5): The company provides detailed ESG reports aligned with frameworks like GRI and TCFD.

3. Ethical Practices & Anti-Corruption (5/5): ServiceNow emphasizes ethical business practices and responsible sourcing.

Weighted Average Score

Environmental: (5+4+5)/3 times 0.3 = 1.40

Social: ( 5+4+5)/3 times 0.3 = 1.40

Governance: (5+5+5)/3 times 0.4 = 2.00

Total Weighted Average Score: 4.80/5

Financial Criteria

Market Cap (50 Billion+): ServiceNow has a market cap over $150 billion, meeting the requirement for scalability and global presence.

EV/EBITDA (<18): ServiceNow's EV/EBITDA ratio is approximately 70, which is significantly above the threshold of 18. This reflects its high-growth nature but may indicate a premium valuation.

EPS Growth (5YR: 8%+): ServiceNow is expected to have an EPS growth over the next five years of approximately 20%.

Operating Margin (15%+): ServiceNow's operating margin is under 13%, which is slightly below the 15% threshold.

Payout Ratio (<20%): ServiceNow does not pay dividends, resulting in a payout ratio of 0%. This supports reinvestment in innovation.

ROI (10%+): ServiceNow's return on equity (ROE) is 11.28%, which aligns with the requirement for efficient capital deployment.

Decision

Modena has decided not to invest in ServiceNow due to its low implied share price and its inability to fully meet our investment criteria. However, we recognize ServiceNow as a sustainability leader with significant potential to drive positive change within the technology industry and beyond.