Business services providers play a critical role for enterprises, assisting them with everything from new hardware integrations to consulting and marketing. Still, investors are uneasy as firms face challenges from AI-driven disruptors and tightening corporate budgets. These doubts have certainly contributed to services stocks’ recent underperformance - over the past six months, the industry’s 2.3% gain has fallen behind the S&P 500’s 9.9% rise.

Investors should tread carefully as many of these companies are also cyclical, and any misstep can have you catching a falling knife. Keeping that in mind, here are three services stocks we’re passing on.

Array (AD)

Market Cap: $4.63 billion

Operating as a majority-owned subsidiary of Telephone and Data Systems since its founding in 1983, Array (NYSE: Array) is a regional wireless telecommunications provider serving 4.6 million customers across 21 states with mobile phone, internet, and IoT services.

Why Should You Dump AD?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 6.8% annually over the last five years
2. Earnings per share have dipped by 42.7% annually over the past five years, which is concerning because stock prices follow EPS over the long term
3. Underwhelming 0.7% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its shrinking returns suggest its past profit sources are losing steam

At $53.62 per share, Array trades at 26.3x forward EV-to-EBITDA. If you’re considering AD for your portfolio, see our FREE research report to learn more.

Applied Digital (APLD)

Market Cap: $7.00 billion

Pivoting from its origins in cryptocurrency mining to become a key player in the AI infrastructure boom, Applied Digital (NASDAQ: APLD) designs and operates specialized data centers that provide high-performance computing infrastructure for artificial intelligence and blockchain applications.

Why Do We Think Twice About APLD?

1. Earnings per share fell by 83.8% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 54.3 percentage points
3. Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution

Applied Digital’s stock price of $24.80 implies a valuation ratio of 67.4x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including APLD in your portfolio.

ePlus (PLUS)

Market Cap: $2.30 billion

Starting as a financing company in 1990 before evolving into a full-service technology provider, ePlus (NASDAQ: PLUS) provides comprehensive IT solutions, professional services, and financing options to help organizations optimize their technology infrastructure and supply chain processes.

Why Does PLUS Give Us Pause?

1. Sales were flat over the last two years, indicating it’s failed to expand this cycle
2. Sales are projected to tank by 2.1% over the next 12 months as demand evaporates further
3. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

ePlus is trading at $87.70 per share, or 19.9x forward P/E. Check out our free in-depth research report to learn more about why PLUS doesn’t pass our bar.

Stocks We Like More

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. 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 Exlservice (+354% 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.