Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. But increasing competition from AI-driven upstarts has tempered enthusiasm, and over the past six months, the industry has pulled back by 5.8%. This drawdown was disheartening since the S&P 500 stood firm.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. With that said, here is one services stock poised to generate sustainable market-beating returns and two we’re swiping left on.
Two Business ServicesStocks to Sell:
Sinclair (SBGI)
Market Cap: $942.7 million
With over 2,400 hours of local news produced weekly and 640 broadcast channels reaching millions of American homes, Sinclair (NASDAQ: SBGI) operates a network of 185 local television stations across 86 U.S. markets, producing news programming and distributing content from major networks.
Why Do We Pass on SBGI?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 7.2% annually over the last five years
- Estimated sales decline of 9.2% for the next 12 months implies a challenging demand environment
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 25.1% annually
Sinclair’s stock price of $13.63 implies a valuation ratio of 2.2x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including SBGI in your portfolio.
Rogers (ROG)
Market Cap: $1.25 billion
With roots dating back to 1832, making it one of America's oldest continuously operating companies, Rogers (NYSE: ROG) designs and manufactures specialized engineered materials and components used in electric vehicles, telecommunications, renewable energy, and other high-performance applications.
Why Do We Avoid ROG?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 1.2% annually over the last five years
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 14.4% annually, worse than its revenue
- Free cash flow margin shrank by 12.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $67.65 per share, Rogers trades at 25.7x forward P/E. To fully understand why you should be careful with ROG, check out our full research report (it’s free).
One Business Services Stock to Buy:
Stride (LRN)
Market Cap: $6.31 billion
Formerly known as K12, Stride (NYSE: LRN) is an education technology company providing education solutions through digital platforms.
Why Is LRN a Top Pick?
- Increase in enrollments shows customers are eagerly embracing its offerings
- Free cash flow margin jumped by 6 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Rising returns on capital show management is finding more attractive investment opportunities
Stride is trading at $149.85 per share, or 19.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
