Business services providers use their specialized expertise to help enterprises streamline operations and cut costs. Market leaders have certainly capitalized on outsourcing trends and digital transformation initiatives to boost sales, helping fuel a 8.2% gain for the industry over the past six months. This performance has closely followed the S&P 500.
Nevertheless, investors should tread carefully as many companies in this space are cyclical due to their reliance on corporate spending budgets. With that said, here is one services stock poised to generate sustainable market-beating returns and two we’re swiping left on.
Two Business Services Stocks to Sell:
Cisco (CSCO)
Market Cap: $480.2 billion
Founded in 1984 by a husband and wife team who wanted computers at Stanford to talk to computers at UC Berkeley, Cisco (NASDAQ: CSCO) designs and sells networking equipment, security solutions, and collaboration tools that help businesses connect their systems and secure their digital operations.
Why Is CSCO Not Exciting?
- Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 4.5% for the last five years
- Free cash flow margin dropped by 6.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Diminishing returns on capital suggest its earlier profit pools are drying up
Cisco’s stock price of $121.38 implies a valuation ratio of 25.4x forward P/E. Check out our free in-depth research report to learn more about why CSCO doesn’t pass our bar.
Clear Channel Outdoor (CCO)
Market Cap: $1.22 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 Does CCO Give Us Pause?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 2.9% annually over the last five years
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
At $2.41 per share, Clear Channel Outdoor trades at 13.9x forward EV-to-EBITDA. If you’re considering CCO for your portfolio, see our FREE research report to learn more.
One Business Services Stock to Buy:
CBIZ (CBZ)
Market Cap: $1.77 billion
With over 120 offices across 33 states and a team of more than 6,700 professionals, CBIZ (NYSE: CBZ) provides accounting, tax, benefits, insurance brokerage, and advisory services to help small and mid-sized businesses manage their finances and operations.
Why Is CBZ a Top Pick?
- Annual revenue growth of 30.3% over the last two years was superb and indicates its market share increased during this cycle
- Earnings per share have massively outperformed its peers over the last two years, increasing by 22.9% annually
- Free cash flow margin of 7% over the last five years means it can fund investments internally, mitigating its dependence on capital markets, and its rising cash conversion increases its margin of safety
CBIZ is trading at $28.74 per share, or 7.4x forward P/E. Is now the right time to buy? Find out in our full 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.
Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
