Business services providers use their specialized expertise to help enterprises streamline operations and cut costs. 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 7.6% over the past six months. This drop was worse than the S&P 500’s 2.8% decline.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here is one services stock poised to generate sustainable market-beating returns and two we’re passing on.

Two Business Services Stocks to Sell:

Getty Images (GETY)

Market Cap: $322.3 million

With a vast library of over 562 million visual assets documenting everything from breaking news to iconic historical moments, Getty Images (NYSE: GETY) is a global visual content marketplace that licenses photos, videos, illustrations, and music to businesses, media outlets, and creative professionals.

Why Do We Avoid GETY?

1. Sales trends were unexciting over the last two years as its 3.5% annual growth was below the typical business services company
2. Free cash flow margin shrank by 14.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Getty Images’s stock price of $0.77 implies a valuation ratio of 22.7x forward P/E. If you’re considering GETY for your portfolio, see our FREE research report to learn more.

CoreCivic (CXW)

Market Cap: $1.89 billion

Originally founded in 1983 as the first private prison company in the United States, CoreCivic (NYSE: CXW) operates correctional facilities, detention centers, and residential reentry programs for government agencies across the United States.

Why Is CXW Not Exciting?

1. Annual revenue growth of 3% over the last five years was below our standards for the business services sector
2. Free cash flow margin dropped by 7.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. ROIC of 5.9% reflects management’s challenges in identifying attractive investment opportunities

CoreCivic is trading at $19.61 per share, or 11.7x forward P/E. To fully understand why you should be careful with CXW, check out our full research report (it’s free).

One Business Services Stock to Watch:

IonQ (IONQ)

Market Cap: $10.19 billion

Founded by quantum physics pioneers from the University of Maryland and Duke University in 2015, IonQ (NYSE: IONQ) develops quantum computers that process information using trapped ions to solve complex computational problems beyond the capabilities of traditional computers.

Why Do We Like IONQ?

1. Annual revenue growth of 143% over the past two years was outstanding, reflecting market share gains this cycle
2. Market share will likely rise over the next 12 months as its expected revenue growth of 81.7% is robust
3. Adjusted operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient

At $27.98 per share, IonQ trades at 45x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum — both boxes checked at the same time.

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