Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. Market leaders have certainly capitalized on outsourcing trends and digital transformation initiatives to boost sales, helping fuel a 19.8% gain for the industry over the past six months - 8.1 percentage points higher than the S&P 500.
Regardless of these results, investors must exercise caution as many companies in this space are sensitive to the ebbs and flows of the broader economy. Keeping that in mind, here are two services stocks boasting durable advantages and one we would avoid.
One Business Services Stock to Sell:
Rogers (ROG)
Market Cap: $2.26 billion
With roots dating back to 1832, making it one of America's oldest continuously operating companies, Rogers (NYSE: ROG) designs and manufactures specialized engineered materials and components used in electric vehicles, telecommunications, renewable energy, and other high-performance applications.
Why Are We Out on ROG?
- Sales stagnated over the last five years and signal the need for new growth strategies
- Earnings per share have dipped by 12.3% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Low returns on capital reflect management’s struggle to allocate funds effectively, and its falling returns suggest its earlier profit pools are drying up
Rogers’s stock price of $126.66 implies a valuation ratio of 29.3x forward P/E. If you’re considering ROG for your portfolio, see our FREE research report to learn more.
Two Business Services Stocks to Watch:
Arlo Technologies (ARLO)
Market Cap: $1.45 billion
Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE: ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.
Why Could ARLO Be a Winner?
- 7.6% annual revenue growth over the last five years surpassed the sector average as its services resonated with customers
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 55.3% over the last two years outstripped its revenue performance
- Free cash flow margin grew by 17.6 percentage points over the last five years, giving the company more chips to play with
Arlo Technologies is trading at $13.37 per share, or 14.9x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Amphenol (APH)
Market Cap: $202.4 billion
With over 90 years of connecting the world's technologies, Amphenol (NYSE: APH) designs and manufactures connectors, cables, sensors, and interconnect systems that enable electrical and electronic connections across virtually every industry.
Why Should You Buy APH?
- Market share has increased this cycle as its 47.2% annual revenue growth over the last two years was exceptional
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 62.1% outpaced its revenue gains
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business
At $82.60 per share, Amphenol trades at 27.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
