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ServiceNow (NOW) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
·3 min read

ServiceNow (NOW) closed the most recent trading day at $554.07, moving +1.66% from the previous trading session. The stock outpaced the S&P 500's daily gain of 0.58%. At the same time, the Dow added 0.49%, and the tech-heavy Nasdaq gained 0.84%.

Heading into today, shares of the maker of software that automates companies' technology operations had gained 7.47% over the past month, outpacing the Computer and Technology sector's gain of 5.17% and the S&P 500's gain of 2.12% in that time.

NOW will be looking to display strength as it nears its next earnings release. In that report, analysts expect NOW to post earnings of $1.07 per share. This would mark year-over-year growth of 11.46%. Meanwhile, our latest consensus estimate is calling for revenue of $1.22 billion, up 27.96% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $4.56 per share and revenue of $4.49 billion. These totals would mark changes of +37.35% and +29.66%, respectively, from last year.

Any recent changes to analyst estimates for NOW should also be noted by investors. These revisions help to show the ever-changing nature of near-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. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an 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. Over the past month, the Zacks Consensus EPS estimate remained stagnant. NOW is holding a Zacks Rank of #3 (Hold) right now.

Looking at its valuation, NOW is holding a Forward P/E ratio of 119.62. This valuation marks a premium compared to its industry's average Forward P/E of 30.89.

Meanwhile, NOW's PEG ratio is currently 4.22. 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. The Computers - IT Services was holding an average PEG ratio of 1.9 at yesterday's closing price.

The Computers - IT Services industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 118, which puts it in the top 47% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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Zacks Investment Research