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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 $388.09, moving -1.22% from the previous trading session. This change lagged the S&P 500's daily gain of 1.37%. Elsewhere, the Dow gained 2.05%, while the tech-heavy Nasdaq added 0.78%.

NOW will be looking to display strength as it nears its next earnings release. In that report, analysts expect NOW to post earnings of $1.02 per share. This would mark year-over-year growth of 43.66%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $1.05 billion, up 25.58% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $4.24 per share and revenue of $4.34 billion. These totals would mark changes of +27.71% and +25.49%, respectively, from last year.

It is also important to note the 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. 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. Over the past month, the Zacks Consensus EPS estimate remained stagnant. NOW currently has a Zacks Rank of #2 (Buy).

Digging into valuation, NOW currently has a Forward P/E ratio of 92.56. This valuation marks a premium compared to its industry's average Forward P/E of 24.71.

Investors should also note that NOW has a PEG ratio of 3.28 right now. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Computers - IT Services was holding an average PEG ratio of 2.14 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 86, which puts it in the top 34% 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.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.


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