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

Zacks Equity Research

ServiceNow (NOW) closed at $294.55 in the latest trading session, marking a -0.68% move from the prior day. This change lagged the S&P 500's daily gain of 0.36%. Meanwhile, the Dow gained 0.01%, and the Nasdaq, a tech-heavy index, added 0.27%.

Heading into today, shares of the maker of software that automates companies' technology operations had gained 3.87% over the past month, lagging the Computer and Technology sector's gain of 4.78% and the S&P 500's gain of 3.98% in that time.

Investors will be hoping for strength from NOW as it approaches its next earnings release, which is expected to be July 24, 2019. In that report, analysts expect NOW to post earnings of $0.64 per share. This would mark year-over-year growth of 30.61%. Our most recent consensus estimate is calling for quarterly revenue of $830.92 million, up 31.67% from the year-ago period.

NOW's full-year Zacks Consensus Estimates are calling for earnings of $3.20 per share and revenue of $3.44 billion. These results would represent year-over-year changes of +28.51% and +32.04%, respectively.

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.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. 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, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating 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 #2 (Buy) right now.

Investors should also note NOW's current valuation metrics, including its Forward P/E ratio of 92.58. Its industry sports an average Forward P/E of 20.28, so we one might conclude that NOW is trading at a premium comparatively.

It is also worth noting that NOW currently has a PEG ratio of 3.31. 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. NOW's industry had an average PEG ratio of 1.77 as of yesterday's close.

The Computers - IT Services industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 104, which puts it in the top 41% 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.

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

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