Business services providers play a critical role for enterprises, assisting them with everything from new hardware integrations to consulting and marketing. 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 1.5%. This drop was discouraging since the S&P 500 returned 5.8%.

Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Keeping that in mind, here is one services stock poised to generate sustainable market-beating returns and two best left ignored.

Two Business Services Stocks to Sell:

Sinclair (SBGI)

Market Cap: $1.03 billion

With over 2,400 hours of local news produced weekly and 640 broadcast channels reaching millions of American homes, Sinclair (NASDAQ: SBGI) operates a network of 185 local television stations across 86 U.S. markets, producing news programming and distributing content from major networks.

Why Do We Steer Clear of SBGI?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 9.2% annually over the last five years
2. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
3. Free cash flow margin dropped by 8.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up

At $14.60 per share, Sinclair trades at 2x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than SBGI.

Telephone and Data Systems (TDS)

Market Cap: $4.45 billion

Operating primarily through its majority-owned subsidiary UScellular and wholly-owned TDS Telecom, Telephone and Data Systems (NYSE: TDS) provides wireless, broadband, video, and voice communications services to 4.6 million wireless and 1.2 million broadband customers across the United States.

Why Do We Think TDS Will Underperform?

1. Annual sales declines of 1.5% for the past five years show its products and services struggled to connect with the market during this cycle
2. Earnings per share have dipped by 21.9% annually over the past five years, which is concerning because stock prices follow EPS over the long term
3. High net-debt-to-EBITDA ratio of 20× increases the risk of forced asset sales or dilutive financing if operational performance weakens

Telephone and Data Systems’s stock price of $38.81 implies a valuation ratio of 3.8x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including TDS in your portfolio.

One Business Services Stock to Buy:

Pure Storage (PSTG)

Market Cap: $19.46 billion

Founded in 2009 as a pioneer in enterprise all-flash storage technology, Pure Storage (NYSE: PSTG) provides all-flash data storage hardware and software that helps organizations manage their data more efficiently across on-premises and cloud environments.

Why Is PSTG a Good Business?

1. Ability to secure long-term commitments with customers is evident in its 23.5% average ARR growth over the past two years
2. Incremental sales over the last five years have been highly profitable as its earnings per share increased by 29.5% annually, topping its revenue gains
3. Strong free cash flow margin of 17% enables it to reinvest or return capital consistently, and its recently improved profitability means it has even more resources to invest or distribute

Pure Storage is trading at $59.53 per share, or 32.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check 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-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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