ServiceNow (NOW) Surpasses Market Returns: Some Facts Worth Knowing

In the latest close session, ServiceNow (NOW) was up +1.11% at $114.88. This move outpaced the S&P 500's daily gain of 1.01%. Meanwhile, the Dow gained 0.83%, and the Nasdaq, a tech-heavy index, added 1.22%.

Shares of the maker of software that automates companies' technology operations witnessed a gain of 6.11% over the previous month, beating the performance of the Computer and Technology sector with its loss of 2.06%, and the S&P 500's loss of 2.86%.

The investment community will be paying close attention to the earnings performance of ServiceNow in its upcoming release. The company is expected to report EPS of $0.95, up 17.28% from the prior-year quarter. In the meantime, our current consensus estimate forecasts the revenue to be $3.75 billion, indicating a 21.39% growth compared to the corresponding quarter of the prior year.

In terms of the entire fiscal year, the Zacks Consensus Estimates predict earnings of $4.12 per share and a revenue of $15.98 billion, indicating changes of +17.38% and +20.31%, respectively, from the former year.

Any recent changes to analyst estimates for ServiceNow should also be noted by investors. These recent revisions tend to reflect the evolving nature of short-term business trends. As such, positive estimate revisions reflect analyst optimism about the business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To exploit this, we've formed the Zacks Rank, a quantitative model that includes these estimate changes and presents a viable rating system.

The Zacks Rank system, stretching from #1 (Strong Buy) to #5 (Strong Sell), has a noteworthy track record of outperforming, validated by third-party audits, with stocks rated #1 producing an average annual return of +25% since the year 1988. Over the past month, the Zacks Consensus EPS estimate has shifted 0.28% downward. As of now, ServiceNow holds a Zacks Rank of #3 (Hold).

Looking at valuation, ServiceNow is presently trading at a Forward P/E ratio of 27.58. This expresses a premium compared to the average Forward P/E of 13.56 of its industry.

It is also worth noting that NOW currently has a PEG ratio of 1.15. 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 industry had an average PEG ratio of 1.18 as trading concluded yesterday.

The Computers - IT Services industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 90, putting it in the top 37% 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.

Remember to apply Zacks.com to follow these and more stock-moving metrics during the upcoming trading sessions.

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ServiceNow, Inc. (NOW): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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