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

Zacks Equity Research

ServiceNow (NOW) closed the most recent trading day at $253.18, moving -0.59% from the previous trading session. This change lagged the S&P 500's daily gain of 0.03%. Elsewhere, the Dow gained 0.28%, while the tech-heavy Nasdaq lost 0.04%.

Prior to today's trading, shares of the maker of software that automates companies' technology operations had lost 1.5% over the past month. This has lagged the Computer and Technology sector's gain of 2.03% and the S&P 500's gain of 2.25% in that time.

Investors will be hoping for strength from NOW as it approaches 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, our latest consensus estimate is calling for revenue of $886.03 million, up 31.63% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $3.24 per share and revenue of $3.46 billion, which would represent changes of +30.12% and +32.55%, respectively, from the prior year.

Investors should also note any 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.

Our research shows that these estimate changes are directly correlated with near-term stock prices. 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.

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. Within the past 30 days, our consensus EPS projection has moved 0.95% lower. NOW is currently sporting a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that NOW has a Forward P/E ratio of 78.54 right now. For comparison, its industry has an average Forward P/E of 22.18, which means NOW is trading at a premium to the group.

Investors should also note that NOW has a PEG ratio of 2.81 right now. 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 1.81 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 100, putting it in the top 40% 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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