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ServiceNow (NOW) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research

In the latest trading session, ServiceNow (NOW) closed at $257.95, marking a -0.55% move from the previous day. This move lagged the S&P 500's daily loss of 0.24%. Meanwhile, the Dow lost 0.3%, and the Nasdaq, a tech-heavy index, lost 0.58%.

Coming into today, shares of the maker of software that automates companies' technology operations had lost 0.36% in the past month. In that same time, the Computer and Technology sector gained 5.16%, while the S&P 500 gained 4.96%.

NOW will be looking to display strength as it nears its next earnings release. On that day, NOW is projected to report earnings of $0.89 per share, which would represent year-over-year growth of 30.88%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $886.13 million, up 31.65% from the year-ago period.

NOW's full-year Zacks Consensus Estimates are calling for earnings of $3.24 per share and revenue of $3.46 billion. These results would represent year-over-year changes of +30.12% and +32.56%, respectively.

It is also important to note the recent changes to analyst estimates for NOW. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. The Zacks Consensus EPS estimate has moved 1.18% lower within the past month. NOW is currently sporting a Zacks Rank of #3 (Hold).

In terms of valuation, NOW is currently trading at a Forward P/E ratio of 80.09. Its industry sports an average Forward P/E of 21.71, so we one might conclude that NOW is trading at a premium comparatively.

Also, we should mention that NOW has a PEG ratio of 2.86. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. Computers - IT Services stocks are, on average, holding a PEG ratio of 1.77 based on yesterday's closing prices.

The Computers - IT Services industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 65, putting it in the top 26% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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