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

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In the latest trading session, ServiceNow (NOW - Free Report) closed at $573.39, marking a -0.87% move from the previous day. This change lagged the S&P 500's daily gain of 0.28%. Meanwhile, the Dow gained 0.11%, and the Nasdaq, a tech-heavy index, added 0.14%.

Coming into today, shares of the maker of software that automates companies' technology operations had lost 7.4% in the past month. In that same time, the Computer and Technology sector lost 4.59%, while the S&P 500 gained 0.12%.

Investors will be hoping for strength from ServiceNow as it approaches its next earnings release, which is expected to be January 26, 2022. In that report, analysts expect ServiceNow to post earnings of $1.43 per share. This would mark year-over-year growth of 22.22%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $1.6 billion, up 28.06% from the year-ago period.

Investors might also notice recent changes to analyst estimates for ServiceNow. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

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. Over the past month, the Zacks Consensus EPS estimate has moved 1.22% lower. ServiceNow is currently sporting a Zacks Rank of #4 (Sell).

Investors should also note ServiceNow's current valuation metrics, including its Forward P/E ratio of 80.52. Its industry sports an average Forward P/E of 32.19, so we one might conclude that ServiceNow is trading at a premium comparatively.

It is also worth noting that NOW currently has a PEG ratio of 2.84. 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 1.46 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 166, which puts it in the bottom 35% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. 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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