Business services providers play a critical role for enterprises, assisting them with everything from new hardware integrations to consulting and marketing. Furthermore, the demand for their offerings is rising as more clients outsource non-core functions, a trend that has enabled the industry to return 12.9% over the past six months. At the same time, the S&P 500 was up 10%.
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. On that note, here are three resilient services stocks at the top of our wish list.
CECO Environmental (CECO)
Market Cap: $2.93 billion
With roots dating back to 1869 and a focus on creating cleaner industrial operations, CECO Environmental (NASDAQ: CECO) provides technology and expertise that helps industrial companies reduce emissions, treat water, and improve energy efficiency across various sectors.
Why Are We Backing CECO?
- Annual revenue growth of 19.9% over the last two years was superb and indicates its market share increased during this cycle
- Market share is on track to rise over the next 12 months as its 23.9% projected revenue growth implies demand will accelerate from its two-year trend
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
CECO Environmental is trading at $81.69 per share, or 47.6x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Maximus (MMS)
Market Cap: $3.21 billion
With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE: MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally.
Why Are We Fans of MMS?
- Adjusted operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 21.2% exceeded its revenue gains over the last two years
- Returns on capital are climbing as management makes more lucrative bets
At $61.17 per share, Maximus trades at 6.8x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
UL Solutions (ULS)
Market Cap: $20.73 billion
Founded in 1894 as a response to the growing dangers of electricity in American homes and businesses, UL Solutions (NYSE: ULS) provides testing, inspection, and certification services that help companies ensure their products meet safety, security, and sustainability standards.
Why Should ULS Be on Your Watchlist?
- Earnings growth has comfortably beaten the peer group average over the last one years as its EPS has compounded at 16.1% annually
- Free cash flow margin increased by 5.3 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
UL Solutions’s stock price of $102.84 implies a valuation ratio of 43.7x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
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