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 22.8% gain for the industry over the past six months - 4.4 percentage points higher than the S&P 500.
Regardless of these results, investors must exercise caution as many companies in this space are sensitive to the ebbs and flows of the broader economy. On that note, here is one services stock poised to generate sustainable market-beating returns and two we’re steering clear of.
Two Business Services Stocks to Sell:
Amdocs (DOX)
Market Cap: $6.09 billion
Powering the digital experiences of approximately 400 communications companies worldwide, Amdocs (NASDAQ:DOX) provides software and services that help telecommunications and media companies manage customer relationships, monetize services, and automate network operations.
Why Is DOX Risky?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.4% annually over the last two years
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.4%
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $58.36 per share, Amdocs trades at 7.5x forward P/E. Read our free research report to see why you should think twice about including DOX in your portfolio.
Kforce (KFRC)
Market Cap: $873 million
With nearly 60 years of matching skilled professionals with the right opportunities, Kforce (NYSE:KFRC) is a professional staffing company that specializes in placing technology and finance experts with businesses on both temporary and permanent bases.
Why Are We Bearish on KFRC?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2% annually over the last five years
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- Waning returns on capital imply its previous profit engines are losing steam
Kforce is trading at $52.07 per share, or 18.8x forward P/E. Dive into our free research report to see why there are better opportunities than KFRC.
One Business Services Stock to Buy:
Dell (DELL)
Market Cap: $349.6 billion
Founded by Michael Dell in his University of Texas dorm room in 1984 with just $1,000, Dell Technologies (NYSE:DELL) provides hardware, software, and services that help organizations build their IT infrastructure, manage cloud environments, and enable digital transformation.
Why Will DELL Outperform?
- Annual revenue growth of 28.3% over the past two years was outstanding, reflecting market share gains this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Rising returns on capital show management is finding more attractive investment opportunities
Dell’s stock price of $548.89 implies a valuation ratio of 19.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.