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

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ServiceNow (NOW - Free Report) closed the most recent trading day at $547.38, moving +0.26% from the previous trading session. The stock outpaced the S&P 500's daily gain of 0.13%. At the same time, the Dow added 0.24%, and the tech-heavy Nasdaq gained 0.15%.

Heading into today, shares of the maker of software that automates companies' technology operations had gained 1.18% over the past month, lagging the Computer and Technology sector's gain of 4.54% and the S&P 500's gain of 2.59% in that time.

NOW will be looking to display strength as it nears its next earnings release. In that report, analysts expect NOW to post earnings of $1.06 per share. This would mark year-over-year growth of 10.42%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $1.22 billion, up 27.96% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $4.55 per share and revenue of $4.49 billion, which would represent changes of +37.05% and +29.66%, respectively, from the prior 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 a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. 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 is currently a Zacks Rank #4 (Sell).

Digging into valuation, NOW currently has a Forward P/E ratio of 119.9. Its industry sports an average Forward P/E of 28.6, 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 4.35. 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. NOW's industry had an average PEG ratio of 1.94 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 180, which puts it in the bottom 30% 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.

To follow NOW in the coming trading sessions, be sure to utilize Zacks.com.


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