Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. Still, investors are uneasy as firms face challenges from AI-driven disruptors and tightening corporate budgets. These doubts have caused the industry to lag recently as services stocks have collectively shed 12.8% over the past six months. This drawdown was worse than the S&P 500’s 10% fall.
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 services stock poised to generate sustainable market-beating returns and two that may face trouble.
Two Business Services Stocks to Sell:
Mirion (MIR)
Market Cap: $2.86 billion
With its technology protecting workers in over 130 countries and equipment used in 80% of cancer centers worldwide, Mirion Technologies (NYSE: MIR) provides radiation detection, measurement, and monitoring solutions for medical, nuclear energy, defense, and scientific research applications.
Why Do We Think Twice About MIR?
- Revenue base of $860.8 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Expenses have increased as a percentage of revenue over the last five years as its operating margin fell by 7.6 percentage points
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $14.40 per share, Mirion trades at 28.6x forward price-to-earnings. If you’re considering MIR for your portfolio, see our FREE research report to learn more.
Crane NXT (CXT)
Market Cap: $2.56 billion
Born from a corporate transformation completed in 2023, Crane NXT (NYSE: CXT) provides specialized technology solutions for payment processing, banknote security, and authentication systems for financial institutions and businesses.
Why Do We Think CXT Will Underperform?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Estimated sales growth of 2.2% for the next 12 months implies demand will slow from its two-year trend
- Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew
Crane NXT’s stock price of $44.66 implies a valuation ratio of 10.2x forward price-to-earnings. Check out our free in-depth research report to learn more about why CXT doesn’t pass our bar.
One Business Services Stock to Buy:
QuinStreet (QNST)
Market Cap: $907.5 million
Founded during the dot-com era in 1999 and specializing in high-intent consumer traffic, QuinStreet (NASDAQ: QNST) operates digital performance marketplaces that connect clients in financial and home services with consumers actively searching for their products.
Why Are We Backing QNST?
- Annual revenue growth of 27.1% over the past two years was outstanding, reflecting market share gains this cycle
- Market share will likely rise over the next 12 months as its expected revenue growth of 21% is robust
- Earnings per share grew significantly over the last two years, massively outpacing its peers
QuinStreet is trading at $16.07 per share, or 16.3x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.
