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ServiceNow (NOW) Exceeds Market Returns: Some Facts to Consider

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ServiceNow (NOW - Free Report) closed at $730.17 in the latest trading session, marking a +0.64% move from the prior day. The stock's change was more than the S&P 500's daily gain of 0.25%. Elsewhere, the Dow gained 0.15%, while the tech-heavy Nasdaq added 0.03%.

Prior to today's trading, shares of the maker of software that automates companies' technology operations had lost 6.29% over the past month. This has lagged the Computer and Technology sector's gain of 8.7% and the S&P 500's gain of 3.34% in that time.

The investment community will be closely monitoring the performance of ServiceNow in its forthcoming earnings report. The company's upcoming EPS is projected at $2.85, signifying a 20.25% increase compared to the same quarter of the previous year. At the same time, our most recent consensus estimate is projecting a revenue of $2.61 billion, reflecting a 21.22% rise from the equivalent quarter last year.

For the annual period, the Zacks Consensus Estimates anticipate earnings of $13.51 per share and a revenue of $10.88 billion, signifying shifts of +25.32% and +21.31%, respectively, from the last year.

Investors should also take note of any recent adjustments to analyst estimates for ServiceNow. Such recent modifications usually signify the changing landscape of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research suggests that these changes in estimates have a direct relationship with upcoming stock price performance. To utilize this, we have created the Zacks Rank, a proprietary model that integrates these estimate changes and provides a functional rating system.

The Zacks Rank system, spanning from #1 (Strong Buy) to #5 (Strong Sell), boasts an impressive track record of outperformance, audited externally, with #1 ranked stocks yielding an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. Currently, ServiceNow is carrying a Zacks Rank of #3 (Hold).

Investors should also note ServiceNow's current valuation metrics, including its Forward P/E ratio of 53.7. Its industry sports an average Forward P/E of 26.45, so one might conclude that ServiceNow is trading at a premium comparatively.

We can also see that NOW currently has a PEG ratio of 2.19. The PEG ratio bears resemblance to the frequently used P/E ratio, but this parameter also includes the company's expected earnings growth trajectory. The average PEG ratio for the Computers - IT Services industry stood at 2.91 at the close of the market yesterday.

The Computers - IT Services industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 151, which puts it in the bottom 41% of all 250+ industries.

The Zacks Industry Rank evaluates the power of our distinct industry groups by determining the average Zacks Rank of the individual stocks forming the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Make sure to utilize to follow all of these stock-moving metrics, and more, in the coming trading sessions.

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