Business services providers play a critical role for enterprises, assisting them with everything from new hardware integrations to consulting and marketing. Market leaders have certainly capitalized on outsourcing trends and digital transformation initiatives to boost sales, helping fuel a 22.1% gain for the industry over the past six months - 5.5 percentage points higher than the S&P 500.
Although these companies have produced results, only a handful will thrive over the long term as AI-driven upstarts are rapidly taking share from the incumbents. On that note, here are two services stocks boasting durable advantages and one best left ignored.
One Business Services Stock to Sell:
Pitney Bowes (PBI)
Market Cap: $2.24 billion
With a century-long history dating back to 1920 and processing over 15 billion pieces of mail annually, Pitney Bowes (NYSE:PBI) provides shipping, mailing technology, logistics, and financial services to businesses of all sizes.
Why Is PBI Not Exciting?
- Sales tumbled by 13% annually over the last five years, showing market trends are working against it during this cycle
- Forecasted revenue decline of 1.7% for the upcoming 12 months implies demand will fall even further
Pitney Bowes is trading at $16.83 per share, or 9.6x forward P/E. To fully understand why you should be careful with PBI, check out our full research report (it’s free).
Two Business Services Stocks to Buy:
Jabil (JBL)
Market Cap: $30.06 billion
With manufacturing facilities spanning the globe from China to Mexico to the United States, Jabil (NYSE:JBL) provides electronics design, manufacturing, and supply chain solutions to companies across various industries, from healthcare to automotive to cloud computing.
Why Will JBL Beat the Market?
- Impressive 11.6% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Enormous revenue base of $35.95 billion provides significant distribution advantages
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 24.4% exceeded its revenue gains over the last two years
At $289.80 per share, Jabil trades at 18.4x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Hewlett Packard Enterprise (HPE)
Market Cap: $84.81 billion
Born from the 2015 split of the iconic Silicon Valley pioneer Hewlett-Packard, Hewlett Packard Enterprise (NYSE:HPE) provides edge-to-cloud technology solutions that help businesses capture, analyze, and act upon their data across hybrid IT environments.
Why Do We Love HPE?
- Offerings are pivotal for their customers’ operations as its ARR has averaged 48.5% growth over the past two years
- Dominant market position is represented by its $41.87 billion in revenue and gives it fixed cost leverage when sales grow
- Additional sales over the last two years increased its profitability as the 28.5% annual growth in its earnings per share outpaced its revenue
Hewlett Packard Enterprise’s stock price of $64.33 implies a valuation ratio of 13.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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