Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. 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 1.2%. This drawdown was discouraging since the S&P 500 returned 6.5%.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Keeping that in mind, here is one resilient services stock at the top of our wish list and two we’re swiping left on.
Two Business Services Stocks to Sell:
CTS (CTS)
Market Cap: $1.55 billion
With roots dating back to 1896 and a global manufacturing footprint, CTS (NYSE: CTS) designs and manufactures sensors, connectivity components, and actuators for aerospace, defense, industrial, medical, and transportation markets.
Why Do We Think Twice About CTS?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Earnings per share were flat over the last two years and fell short of the peer group average
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
CTS’s stock price of $53.22 implies a valuation ratio of 22x forward P/E. If you’re considering CTS for your portfolio, see our FREE research report to learn more.
TD SYNNEX (SNX)
Market Cap: $12.76 billion
Serving as the crucial middleman in the technology supply chain, TD SYNNEX (NYSE: SNX) is a global technology distributor that connects thousands of IT manufacturers with resellers, helping businesses access hardware, software, and technology solutions.
Why Does SNX Give Us Pause?
- Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 4.2% over the last two years was below our standards for the business services sector
- Performance over the past five years shows its incremental sales were less profitable as its earnings per share were flat
- Low free cash flow margin of 1.6% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
At $160.70 per share, TD SYNNEX trades at 10.7x forward P/E. Read our free research report to see why you should think twice about including SNX in your portfolio.
One Business Services Stock to Buy:
Napco (NSSC)
Market Cap: $1.68 billion
Protecting everything from schools to government facilities since 1969, Napco Security Technologies (NASDAQ: NSSC) manufactures electronic security devices, access control systems, and communication services for intrusion and fire alarm systems.
Why Should You Buy NSSC?
- Impressive 14% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Robust free cash flow margin of 19.3% gives it many options for capital deployment, and its improved cash conversion implies it’s becoming a less capital-intensive business
- Returns on capital are climbing as management makes more lucrative bets
Napco is trading at $47.18 per share, or 30.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
