ServiceNow, Inc. (NOW) vs Targa Resources Corp. (TRGP): Which Is the Better Buy in 2026?
As of 2026-11-01, NOW is overvalued at $105, with a DCF intrinsic value of $76 and a margin of safety of -38%. TRGP is overvalued at $315, with an intrinsic value of $14 and a margin of safety of -2159%. Of the two, NOW has the wider margin of safety.
Rewards
- ★Gross margin of 73.1% indicates strong pricing power — typical of businesses with significant intellectual property or brand strength.
- ★Free cash flow has grown at a 27.8% CAGR over the past 4 years, demonstrating strong earnings power growth.
- ★Each dollar of retained earnings has created $3.22 of earning power — management is an exceptional capital allocator.
- ★Targa Resources Corp. has maintained ROIC above 10% for 4 consecutive years, suggesting solid business economics.
- ★Return on equity has consistently exceeded 20% over 4 years, indicating efficient use of shareholder capital.
- ★Each dollar of retained earnings has created $2.97 of earning power — management is an exceptional capital allocator.
Risks
- ⚠Despite buyback spending, shares outstanding increased in 3 out of 3 years — stock-based compensation is offsetting repurchases.
- ⚠FCF yield of 5.3% suggests reasonable valuation assuming continued moderate growth.
- ⚠FCF yield of 0.9% is below 3%, meaning the market is pricing in substantial future growth to justify the current price.
- ⚠Trailing P/E of 30.1x is 28% above the historical average of 23.5x — the stock trades at a premium to its own history.
- ⚠High leverage (5.12x net debt/equity) combined with thin interest coverage (-1.0x) poses financial risk.
Key Valuation Metrics
Learn more →Historical Fundamentals
Learn more →Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
Price ÷ Earnings Per Share — how many years of current earnings you're paying for at today's price. Lower P/E may indicate undervaluation. The dashed forward point is the forward P/E — today's price ÷ analyst consensus EPS.
$1 Retained Earnings Test
Learn more →> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Buffett's "$1 Test": For every $1 of earnings retained, has management created at least $1 of market value?
> $1 created per $1 retained = Value Creator · < $1 created = Value Destroyer
Discounted Cash Flow (DCF) Analysis
Learn more →Reverse DCF — Market-Implied Growth
Learn more →What growth rate is the market pricing in at $105?
The market implies +23.8% Owner Earnings growth, below historical trends — potential opportunity.
Standard FCF implies a more demanding +7.4%, reflecting heavy growth investment expected to generate future returns.
What growth rate is the market pricing in at $315?
The market implies +18.8% Owner Earnings growth, above historical trends.
Standard FCF implies a demanding +35.6%, reflecting heavy growth investment.
Economic Moat Score
Learn more →Narrow moat with revenue predictability as the key competitive advantage. Improving roic consistency would strengthen the moat.
Narrow moat with roic consistency as the key competitive advantage. Improving reinvestment efficiency would strengthen the moat.
Forensic Accounting
Learn more →M-Score Trend
M-Score Trend
Beneish's 8-variable model estimates the probability of earnings manipulation. An M-Score above -1.78 signals elevated risk — companies in this range have historically been 3-5× more likely to be manipulating earnings. Scores between -2.22 and -1.78 fall in a grey zone warranting further investigation.
Ownership Breakdown
Learn more →High insider ownership aligns management incentives with shareholders. Institutional concentration can indicate smart-money conviction but also crowding risk.
Insider Buying Activity
Learn more →Open market purchases · includes direct & indirect ownership · excludes option exercises.
Insider Selling Activity
Learn more →Direct ownership only · excludes indirect, option exercises, planned (10b5-1) sales & derivatives.
🎭 Mr. Market's Mood
Learn more →"Market is pessimistic — investigate whether fears are temporary or structural"
"Market is optimistic — be cautious and ensure you have a margin of safety"
Composite sentiment score based on market signals. Inspired by Buffett’s "Mr. Market" allegory — fear = potential opportunity, greed = potential risk. Must be used alongside fundamental analysis, not in isolation.
⚖️ Buffett Signal
Learn more →The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
The Buffett Signal cross-references market sentiment with DCF valuation. Configure the DCF Analysis above to generate a signal.
Frequently Asked Questions: NOW vs TRGP
Is ServiceNow, Inc. or Targa Resources Corp. more undervalued in 2026?▼
Based on our discounted cash flow model, NOW trades at a -38.4% margin of safety (intrinsic value $76 vs. price $105), compared to TRGP's -2158.9% margin of safety (intrinsic $14 vs. $315).
Which stock has a wider economic moat, ServiceNow, Inc. or Targa Resources Corp.?▼
NOW scores 61/100 (Narrow moat), while TRGP scores 54/100 (Narrow moat). The moat score measures competitive advantage durability across ROIC consistency, margin stability, revenue predictability, and reinvestment efficiency.
Is Targa Resources Corp. in financial distress?▼
TRGP's Altman Z-Score of 2.3 places it in the Grey zone, signaling elevated bankruptcy risk. NOW scores 8.4 (Safe zone). The Altman Z-Score is a five-factor model that predicts insolvency within two years; scores below 1.81 indicate significant distress.
Which company has better free cash flow, ServiceNow, Inc. or Targa Resources Corp.?▼
ServiceNow, Inc. (NOW) generates a 5.3% free cash flow yield, compared to Targa Resources Corp.'s 0.9%. A higher FCF yield means the business converts more of its market value into cash that can be returned to shareholders or reinvested.
Which stock has higher return on invested capital, ServiceNow, Inc. or Targa Resources Corp.?▼
TRGP earns 15.7% ROIC versus NOW's 9.9%. A higher ROIC means the company generates more profit per dollar of capital employed, a hallmark of durable competitive advantage in Buffett-style analysis.