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

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In the latest trading session, ServiceNow (NOW - Free Report) closed at $647, marking a +0.76% move from the previous day. This change lagged the S&P 500's 0.96% gain on the day. Meanwhile, the Dow gained 0.61%, and the Nasdaq, a tech-heavy index, lost 0.04%.

Coming into today, shares of the maker of software that automates companies' technology operations had lost 5.46% in the past month. In that same time, the Computer and Technology sector lost 1.81%, while the S&P 500 lost 0.21%.

Wall Street will be looking for positivity from ServiceNow as it approaches its next earnings report date. The company is expected to report EPS of $1.43, up 22.22% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $1.6 billion, up 28.06% from the prior-year quarter.

NOW's full-year Zacks Consensus Estimates are calling for earnings of $5.92 per share and revenue of $5.88 billion. These results would represent year-over-year changes of +27.86% and +30.13%, respectively.

It is also important to note the recent changes to analyst estimates for ServiceNow. 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. 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, 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 remained stagnant. ServiceNow currently has a Zacks Rank of #3 (Hold).

In terms of valuation, ServiceNow is currently trading at a Forward P/E ratio of 108.51. For comparison, its industry has an average Forward P/E of 33.7, which means ServiceNow is trading at a premium to the group.

It is also worth noting that NOW currently has a PEG ratio of 3.83. 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 industry currently had an average PEG ratio of 1.64 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 157, putting it in the bottom 39% 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.

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