Manning & Napier Buys Stake in ServiceNow

Company has no debt with increased revenue growth, free cash flow growth and gross profits over the previous 6 years

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May 26, 2016
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Manning & Napier Advisors Inc. purchased a 5,395,730-share stake of ServiceNow Inc. (NOW, Financial) in the first quarter.

ServiceNow is a leading provider of enterprise cloud computing solutions that define, structure, manage and automate services across the global enterprise. Originally, the company offered solutions that streamline workflows within the IT Service Management (ITSM) but continuously expanded its offering to other verticals like IT Operation Management (ITOM), Customer Service, Security, HR, Financials and Platform as a Service (PaaS).

ServiceNow has a market cap of $11.52 billion, an enterprise value of $10.62 billion, a P/B ratio of 37.77 and a quick ratio of 1.14.

According to GuruFocus, ServiceNow has a 6/10 financial rating with no debt. The company also has a 3/10 profitability and growth rating according to GuruFocus with a -39.68% operating margin and a -28.19% ROA.

ServiceNow is also traded in Germany.

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Manning & Napier may have decided to buy the stake for the following reasons:

  • The company revenue growth has grown 36% over the previous 12 months.
  • The company has increased its cash flow from $29 million in June 2011 to $229 million over the previous trailing 12 months, an average annual increase of 41% over the previous five years.
  • ServiceNow's gross profit has increased from $27 million in June 2010 to $753 million over the previous 12 trailing months, an average annual increase of 74% over the previous six years.
  • The company has nearly tripled its market cap over the previous four years from $3.80 billion in December 2012 to $11.52 billion today.
  • Manning & Napier is a defensive investor and ServiceNow has zero debt with an Altman Z-score of 3.62, according to GuruFocus. This means that the company is in the safe zone from filing for bankruptcy.

Manning & Napier is an investment firm headquartered in New York that was founded in April 1970 by Bill Manning and Bill Napier. The two partners learned early on that there is a tremendous amount of volatility in the stock market when they survived one of the greatest bear markets during the early 1970s.

Manning & Napier had to endure 694 days between Jan. 11, 1973 and Dec. 6, 1974, when the New York Stock Exchange's Dow Jones Industrial Average benchmark lost over 45% of its value, making it the seventh-worst bear market in the history of the index.

After experiencing one of the biggest declines in the history of the market. Manning and Napier learned how to adjust their investment strategies as defensive investors, an investing philosophy they still employ today.

Cheers to your investment success.

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