Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. Still, investors are uneasy as firms face challenges from AI-driven disruptors and tightening corporate budgets. These doubts have caused the industry to lag recently as services stocks have collectively shed 6.8% over the past six months. This performance was discouraging since the S&P 500 held its ground.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. With that said, here is one services stock boasting a durable advantage and two we’re swiping left on.
Two Business Services Stocks to Sell:
Benchmark (BHE)
Market Cap: $1.90 billion
Operating as a critical behind-the-scenes partner for complex technology products since 1979, Benchmark Electronics (NYSE: BHE) provides advanced manufacturing, engineering, and technology solutions for original equipment manufacturers across aerospace, medical, industrial, and technology sectors.
Why Are We Cautious About BHE?
- Annual sales declines of 3.2% for the past two years show its products and services struggled to connect with the market during this cycle
- Poor free cash flow margin of 0.7% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Low returns on capital reflect management’s struggle to allocate funds effectively
Benchmark’s stock price of $53.22 implies a valuation ratio of 21.1x forward P/E. If you’re considering BHE for your portfolio, see our FREE research report to learn more.
Clear Channel Outdoor (CCO)
Market Cap: $1.19 billion
With thousands of digital and traditional displays lighting up America's highways, city streets, and airports, Clear Channel Outdoor (NYSE: CCO) operates billboards, street furniture, and airport displays, connecting advertisers with millions of consumers across the US.
Why Are We Hesitant About CCO?
- Sales tumbled by 2.9% annually over the last five years, showing market trends are working against its favor during this cycle
- Cash burn makes us question whether it can achieve sustainable long-term growth
- 12× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $2.38 per share, Clear Channel Outdoor trades at 13.9x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including CCO in your portfolio.
One Business Services Stock to Buy:
Arlo Technologies (ARLO)
Market Cap: $1.45 billion
Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE: ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.
Why Will ARLO Outperform?
- 8.2% annual revenue growth over the last five years surpassed the sector average as its services resonated with customers
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 61% outpaced its revenue gains
- Free cash flow margin grew by 18.5 percentage points over the last five years, giving the company more chips to play with
Arlo Technologies is trading at $13.61 per share, or 16.8x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
