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

Zacks Equity Research
·3 min read

ServiceNow (NOW) closed at $553.89 in the latest trading session, marking a +0.7% move from the prior day. This move outpaced the S&P 500's daily gain of 0.35%. At the same time, the Dow added 0.23%, and the tech-heavy Nasdaq gained 0.26%.

Coming into today, shares of the maker of software that automates companies' technology operations had gained 5.94% in the past month. In that same time, the Computer and Technology sector gained 6.75%, while the S&P 500 gained 3.27%.

Investors will be hoping for strength from NOW as it approaches its next earnings release. In that report, analysts expect NOW to post earnings of $1.06 per share. This would mark year-over-year growth of 10.42%. Meanwhile, our latest consensus estimate is calling for revenue of $1.22 billion, up 27.96% from the prior-year quarter.

NOW's full-year Zacks Consensus Estimates are calling for earnings of $4.55 per share and revenue of $4.49 billion. These results would represent year-over-year changes of +37.05% and +29.66%, 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. 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. The Zacks Consensus EPS estimate remained stagnant within the past month. NOW is holding a Zacks Rank of #3 (Hold) right now.

Valuation is also important, so investors should note that NOW has a Forward P/E ratio of 120.8 right now. This valuation marks a premium compared to its industry's average Forward P/E of 30.31.

It is also worth noting that NOW currently has a PEG ratio of 4.39. 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. Computers - IT Services stocks are, on average, holding a PEG ratio of 1.97 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 174, putting it in the bottom 32% 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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Zacks Investment Research