ServiceNow (NOW) Gains But Lags Market: What You Should Know

ServiceNow (NOW) closed at $460.29 in the latest trading session, marking a +0.75% move from the prior day. The stock lagged the S&P 500’s daily gain of 0.99%. At the same time, the Dow added 0.51%, and the tech-heavy Nasdaq lost 0.31%.

Heading into today, shares of the maker of software that automates companies’ technology operations had lost 0.39% over the past month, outpacing the Computer and Technology sector’s loss of 11.18% and lagging the S&P 500’s gain of 7.91% in that time.

Investors will be hoping for strength from ServiceNow as it approaches its next earnings release, which is expected to be July 27, 2022. In that report, analysts expect ServiceNow to post earnings of $1.53 per share. This would mark year-over-year growth of 7.75%. Meanwhile, our latest consensus estimate is calling for revenue of $1.76 billion, up 25.17% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $7.30 per share and revenue of $7.42 billion. These totals would mark changes of +23.31% and +25.81%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for ServiceNow. These revisions typically reflect the latest short-term business trends, which can change frequently. As such, positive estimate revisions reflect analyst optimism about the company’s business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an 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. Over the past month, the Zacks Consensus EPS estimate has moved 0.75% lower. ServiceNow currently has a Zacks Rank of #3 (Hold).

Valuation is also important, so investors should note that ServiceNow has a Forward P/E ratio of 62.57 right now. For comparison, its industry has an average Forward P/E of 17.66, which means ServiceNow is trading at a premium to the group.

We can also see that NOW currently has a PEG ratio of 2.18. 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 was holding an average PEG ratio of 1.21 at yesterday’s closing price.

The Computers – IT Services industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 87, putting it in the top 35% 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.