Business services providers play a critical role for enterprises, assisting them with everything from new hardware integrations to consulting and marketing. But increasing competition from AI-driven upstarts has tempered enthusiasm, and over the past six months, the industry has pulled back by 10.3%. This drop was worse than the S&P 500’s 2.4% decline.
While some companies have durable competitive advantages that enable them to grow in any landscape, the odds aren’t great for the ones we’re analyzing today. Taking that into account, here are three services stocks best left ignored.
IAC (IAC)
Market Cap: $2.90 billion
Originally known as InterActiveCorp and built through Barry Diller's strategic acquisitions since the 1990s, IAC (NASDAQ: IAC) operates a portfolio of category-leading digital businesses including Dotdash Meredith, Angi, and Care.com, focusing on digital publishing, home services, and caregiving platforms.
Why Is IAC Risky?
- Annual sales declines of 1.3% for the past five years show its products and services struggled to connect with the market during this cycle
- Earnings per share have dipped by 51% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Negative returns on capital show management lost money while trying to expand the business
IAC is trading at $36.27 per share, or 29.2x forward P/E. Read our free research report to see why you should think twice about including IAC in your portfolio.
SS&C (SSNC)
Market Cap: $19.79 billion
Founded in 1986 as a bridge between technology and financial services, SS&C Technologies (NASDAQ: SSNC) provides software and software-enabled services that help financial firms and healthcare organizations automate complex business processes.
Why Do We Think Twice About SSNC?
- Annual revenue growth of 4.9% over the last five years was below our standards for the business services sector
- Free cash flow margin shrank by 3 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Low returns on capital reflect management’s struggle to allocate funds effectively
At $80.56 per share, SS&C trades at 13.3x forward P/E. If you’re considering SSNC for your portfolio, see our FREE research report to learn more.
EchoStar (SATS)
Market Cap: $5.47 billion
Following its 2023 acquisition of DISH Network, EchoStar (NASDAQ: SATS) provides satellite communications, pay-TV services, wireless networks, and broadband solutions across consumer and enterprise markets.
Why Are We Hesitant About SATS?
- Earnings per share fell by 11.5% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Free cash flow margin shrank by 6.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
EchoStar’s stock price of $19.18 implies a valuation ratio of 3.4x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why SATS doesn’t pass our bar.
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 Growth Stocks for this month. 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.
