Business services providers use their specialized expertise to help enterprises streamline operations and cut costs. But cutbacks in corporate spending and the threat of new AI products have kept sentiment in check, and over the past six months, the industry has tumbled by 3.1%. This performance was disheartening since the S&P 500 gained 2.8%.
A cautious approach is imperative when dabbling in these companies as many are also sensitive to the ebbs and flows of the broader economy. With that said, here are three services stocks we’re passing on.
ABM (ABM)
Market Cap: $2.85 billion
With roots dating back to 1909 as a window washing company, ABM Industries (NYSE: ABM) provides integrated facility management, infrastructure, and mobility solutions across various sectors including commercial, manufacturing, education, and aviation.
Why Should You Dump ABM?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Performance over the past two years shows its incremental sales were less profitable as its earnings per share were flat
- Free cash flow margin dropped by 8.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
ABM’s stock price of $45.77 implies a valuation ratio of 11.8x forward P/E. Read our free research report to see why you should think twice about including ABM in your portfolio.
FTI Consulting (FCN)
Market Cap: $5.39 billion
With a team of experts deployed across 30+ countries to tackle complex business challenges, FTI Consulting (NYSE: FCN) is a global business advisory firm that helps organizations manage change, mitigate risk, and resolve disputes across financial, legal, operational, and regulatory matters.
Why Do We Think Twice About FCN?
- Estimated sales growth of 1.3% for the next 12 months implies demand will slow from its two-year trend
- Costs have risen faster than its revenue over the last five years, causing its adjusted operating margin to decline by 2.8 percentage points
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.6 percentage points
At $160.11 per share, FTI Consulting trades at 19.9x forward P/E. If you’re considering FCN for your portfolio, see our FREE research report to learn more.
Insperity (NSP)
Market Cap: $2.21 billion
Pioneering the professional employer organization (PEO) industry it helped establish, Insperity (NYSE: NSP) provides human resources outsourcing services to small and medium-sized businesses, handling payroll, benefits, compliance, and HR administration.
Why Does NSP Worry Us?
- Annual revenue growth of 4.1% over the last two years was below our standards for the business services sector
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 5.7% annually while its revenue grew
- Free cash flow margin dropped by 5.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Insperity is trading at $58.57 per share, or 15.9x forward P/E. To fully understand why you should be careful with NSP, check out our full research report (it’s free).
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. 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-small-cap company Exlservice (+354% 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
