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ServiceNow (NOW) Gains But Lags Market: What You Should Know

Zacks Equity Research
·3 mins read

ServiceNow (NOW) closed the most recent trading day at $500, moving +1.72% from the previous trading session. This change lagged the S&P 500's 1.74% gain on the day. Meanwhile, the Dow gained 1.91%, and the Nasdaq, a tech-heavy index, added 1.88%.

Coming into today, shares of the maker of software that automates companies' technology operations had gained 10.92% in the past month. In that same time, the Computer and Technology sector lost 1.67%, while the S&P 500 lost 1.86%.

NOW will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $1.04, up 5.05% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $1.11 billion, up 25.34% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $4.45 per share and revenue of $4.41 billion, which would represent changes of +34.04% and +27.38%, respectively, from the prior year.

Investors might also notice recent changes to analyst estimates for NOW. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. NOW is currently sporting a Zacks Rank of #3 (Hold).

Looking at its valuation, NOW is holding a Forward P/E ratio of 110.48. This represents a premium compared to its industry's average Forward P/E of 26.63.

We can also see that NOW currently has a PEG ratio of 3.82. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Computers - IT Services industry currently had an average PEG ratio of 2.53 as of yesterday's close.

The Computers - IT Services industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 188, putting it in the bottom 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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