ServiceNow Inc. (NYSE:NOW)

Return on Assets (ROA)

The Return on Assets demonstrates an overall increasing trend from the first available data point in March 2021 at 1.36% up to a peak of 10.99% in December 2023. Following this peak, there is a notable decline to 6.29% by March 2024, after which the ROA stabilizes and slightly recovers, reaching approximately 7.53% by June 2025. This pattern suggests an initial period of improving asset efficiency, followed by a pullback and subsequent stabilization in asset returns.

Financial Leverage

Financial leverage shows a gradual decreasing trend across the entire timeline. Starting around 2.73 in early 2020, the ratio steadily declines with minor fluctuations to about 2.02 by June 2025. This steady reduction indicates a deliberate move towards a lower reliance on debt financing or more conservative capital structure management over the observed periods.

Return on Equity (ROE)

Return on Equity mirrors the trend seen in ROA, beginning at approximately 4.18% in March 2021 and significantly increasing to a peak of 23.78% in December 2023. Post peak, ROE experiences a sharp decrease to 13.22% by March 2024 but then shows recovery and stabilization, fluctuating around 15% through to June 2025. The rise and fall of ROE coincide with the trend in ROA but at higher absolute values, consistent with the presence of financial leverage effects, which are diminishing over time.

The analysis of the financial ratios over the reported periods reveals several notable trends regarding profitability, efficiency, leverage, and overall return to shareholders.

Net Profit Margin

The net profit margin demonstrates a generally positive trajectory from early 2020 through late 2023, increasing from approximately 2.62% to a peak near 20.34%. This indicates a significant improvement in profitability relative to revenue during this period. However, following this peak, there is a marked decline beginning in early 2024, with margins dropping to around 11.51% initially, before stabilizing at approximately 13.78% by mid-2025. The sharp rise followed by a decline suggests possibly extraordinary circumstances or one-time gains boosting profits, followed by normalization or increased cost pressures.

Asset Turnover

The asset turnover ratio is relatively stable throughout the periods observed, fluctuating in a narrow range between 0.52 and 0.62. This consistency indicates that the efficiency with which the company uses its assets to generate revenue has remained steady. Minor oscillations do not suggest significant changes in operational efficiency or asset utilization.

Financial Leverage

Financial leverage shows a steady decrease over the timeline, moving from about 2.73 in early 2020 down to values near 2.02 by mid-2025. This trend reflects a gradual reduction in the use of debt relative to equity, implying a more conservative capital structure or repayment of liabilities. The consistent decline denotes enhanced financial stability and potentially lower risk exposure due to diminishing leverage.

Return on Equity (ROE)

The ROE figures mirror the profit margin trend, initially rising from around 4.18% in 2020 to a peak exceeding 23% in late 2023. This indicates increasing effectiveness in generating returns for shareholders during this period. Subsequently, ROE experiences a reduction beginning in 2024, dropping to the low-to-mid teens by mid-2025. Nonetheless, even after the decline, ROE remains significantly higher than its starting levels, suggesting sustained shareholder value creation, albeit at a normalized pace after the peak.

In summary, the financial data depicts a company that improved profitability and shareholder returns substantially from 2020 to 2023, accompanied by stable asset utilization and a gradual reduction in leverage, enhancing financial prudence. The post-2023 decline in profit margins and ROE indicates a moderation from peak performance levels, pointing to either a return to normal operating conditions or emerging challenges impacting profitability.

Net Profit Margin

The net profit margin demonstrates a consistent upward trend from the earliest available data in March 2021 through December 2023, rising steadily from 2.62% to a peak of 20.34%. This indicates an improved ability to convert revenue into profit over this period. After this peak, a notable decline occurs in March 2024, dropping to 11.51%, followed by moderate recovery and stabilization around 13.5% through June 2025. The large jump observed between December 2022 and December 2023 suggests significant operational improvements or cost efficiencies realized during that period but was not sustained at the same level thereafter.

Asset Turnover

The asset turnover ratio remains relatively stable throughout the observed periods, fluctuating mildly between 0.52 and 0.62. Initial readings in early 2021 show a gradual increase from 0.52 to a short-term high of 0.62 by December 2021, indicating modestly more efficient use of assets in generating revenue. Thereafter, the ratio tends to oscillate around 0.54 to 0.57 without a clear directional trend, suggesting that asset utilization efficiency has maintained a steady state following the initial improvement phase.

Return on Assets (ROA)

Return on Assets exhibits a general upward trajectory, improving from 1.36% in March 2021 to a prominent peak of 10.99% in December 2023. This pattern corresponds to the trend seen in net profit margin, reflecting enhanced overall efficiency in asset utilization to generate returns. Following this peak, ROA declines significantly to 6.29% by March 2024 and remains relatively stable around the 7% mark through mid-2025. The synchronization of ROA and net profit margin trends suggests that the underlying causes for the changes impact profitability rather than asset base changes alone.