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3 Top Stocks to Watch From the Business Services Industry
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Rise in manufacturing and service activities, along with the increased technology adoption and success of the work-from-home trend, is enabling the Zacks Business-Services industry to support a growing demand environment.
Prudent growth strategies, innovation and technology enhancements are helping WNS (Holdings) Limited (WNS - Free Report) , Avis Budget Group, Inc. (CAR - Free Report) and BGSF, Inc. (BGSF - Free Report) to sail through the ongoing pandemic.
About the Industry
The Zacks Business Services industry comprises companies that offer a range of services, including specialty rental, supply-chain management, electronic commerce, technology, document management, digital audience, data, voice, analytical and business transformation, among others.
The pandemic will continue to change the way industry players have conducted businesses and delivered services so far. The industry’s key focus is currently on channelizing money and efforts toward more effective operational components, such as technology, digital transformation and data-driven decision-making. To position themselves suitably in the post-pandemic era and better utilize the opportunities that the economic recovery will bring, service providers are increasing their efforts toward strategic initiatives.
What's Shaping the Future of the Business Services Industry?
Demand Stability: The industry is mature, with demand for services being in good shape over time. Revenues, income and cash flows are anticipated to gradually reach pre-pandemic healthy levels, helping most industry players pay out stable dividends.
Healthy Manufacturing and Service Activities: With both manufacturing and service activities in the pink, the demand for consulting services is rising steadily. Both the manufacturing PMI and the Services PMI, measured by the Institute for Supply Management, have stayed above the 50% mark for the past 25 months, indicating continued expansion.
Relaxing Immigration Restrictions: Higher talent costs due to a competitive talent market, especially under the Trump-era restrictions on immigration, had been a headwind for the industry. However, President Joe Biden’s moves to lift the Trump-era ban on legal immigration should help service providers thrive with the increased flow of foreign talent.
Zacks Industry Rank Indicates Bright Prospects
The Business-Services industry is housed within the broader Business Services sector. It carries a Zacks Industry Rank #85, which places it in the top 34% of more than 250 Zacks industries.
The group’s Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The analysts covering the companies in this industry have been steadily pushing their estimates northward. Over the past year, the Zacks Consensus Estimate for the industry’s 2022 earnings has moved 35.4% north.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.
Industry's Price Performance
Over the past year, the Zacks Business Services industry has declined 28.7% compared with S&P 500 composite’s fall of 9.8%. The broader sector has declined 44.8% over the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing business-services stocks, the industry is currently trading at 11.68 compared with the S&P 500’s 16.32 and the sector’s 23.08.
Over the past five years, the industry has traded as high as 32.7X, as low as 8.98X and at the median of 18.83X, as the charts below show.
Price to Forward 12-Month P/E Ratio
3 Service Stocks to Bet On
We are presenting three stocks that are well poised togrow in the near term.
WNS (Holdings) Limited: The business process management (“BPM”) company offers data, voice and analytical and business transformation services and currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
WNS is trying to meet the pandemic-induced digital transformation trends by investing in digital capabilities that streamline clients’ operations and enhance decision making through data and analytics. Investments are mainly focused on creation and innovation labs, specialized centers of excellence and industry-specific digital offerings.
The company’s opportunities in the BPM space are also on the rise, with clients’ growing need to use analytics and industry-specific expertise for transforming their business models.
The Zacks Consensus Estimate for the ongoing year’s EPS has been revised 0.3% upward over the past 60 days.
Price and Consensus: WNS
Avis Budget Group: The company is a provider of car and truck rentals, car sharing, and ancillary products and services, and currently carries a Zacks Rank #2 (Buy).
Avis Budget operates through distinct global brands that focus on different market segments and complement other brands in their respective regional markets. The company’s ability to cater to a wide range of mobility demands helps it expand and strengthen its global foothold through organic growth.
The company remains focused on expanding its connected vehicles fleet, as this allows cost reduction and streamlining of operations. This also enables enhanced tracking of idle vehicles and automated processing of ready-to-rent cars.
The Zacks Consensus Estimate for the ongoing year’s EPS has been revised 9.1% upward over the past 60 days.
Price and Consensus: CAR
BGSF: This provider of workforce solutions and placement services also carries a Zacks Rank #2. The company’s Real Estate segment is expected to benefit from market recovery and rapid increase in demand. Its Professional segment is expected to benefit from strong activity in IT Consulting and Managed Services sectors.
The Zacks Consensus Estimate for the ongoing year’s EPS has remained unchanged at $1.04 in the past 60 days.
Price and Consensus: BGSF
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3 Top Stocks to Watch From the Business Services Industry
Rise in manufacturing and service activities, along with the increased technology adoption and success of the work-from-home trend, is enabling the Zacks Business-Services industry to support a growing demand environment.
Prudent growth strategies, innovation and technology enhancements are helping WNS (Holdings) Limited (WNS - Free Report) , Avis Budget Group, Inc. (CAR - Free Report) and BGSF, Inc. (BGSF - Free Report) to sail through the ongoing pandemic.
About the Industry
The Zacks Business Services industry comprises companies that offer a range of services, including specialty rental, supply-chain management, electronic commerce, technology, document management, digital audience, data, voice, analytical and business transformation, among others.
The pandemic will continue to change the way industry players have conducted businesses and delivered services so far. The industry’s key focus is currently on channelizing money and efforts toward more effective operational components, such as technology, digital transformation and data-driven decision-making. To position themselves suitably in the post-pandemic era and better utilize the opportunities that the economic recovery will bring, service providers are increasing their efforts toward strategic initiatives.
What's Shaping the Future of the Business Services Industry?
Demand Stability: The industry is mature, with demand for services being in good shape over time. Revenues, income and cash flows are anticipated to gradually reach pre-pandemic healthy levels, helping most industry players pay out stable dividends.
Healthy Manufacturing and Service Activities: With both manufacturing and service activities in the pink, the demand for consulting services is rising steadily. Both the manufacturing PMI and the Services PMI, measured by the Institute for Supply Management, have stayed above the 50% mark for the past 25 months, indicating continued expansion.
Relaxing Immigration Restrictions: Higher talent costs due to a competitive talent market, especially under the Trump-era restrictions on immigration, had been a headwind for the industry. However, President Joe Biden’s moves to lift the Trump-era ban on legal immigration should help service providers thrive with the increased flow of foreign talent.
Zacks Industry Rank Indicates Bright Prospects
The Business-Services industry is housed within the broader Business Services sector. It carries a Zacks Industry Rank #85, which places it in the top 34% of more than 250 Zacks industries.
The group’s Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The analysts covering the companies in this industry have been steadily pushing their estimates northward. Over the past year, the Zacks Consensus Estimate for the industry’s 2022 earnings has moved 35.4% north.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.
Industry's Price Performance
Over the past year, the Zacks Business Services industry has declined 28.7% compared with S&P 500 composite’s fall of 9.8%. The broader sector has declined 44.8% over the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing business-services stocks, the industry is currently trading at 11.68 compared with the S&P 500’s 16.32 and the sector’s 23.08.
Over the past five years, the industry has traded as high as 32.7X, as low as 8.98X and at the median of 18.83X, as the charts below show.
Price to Forward 12-Month P/E Ratio
3 Service Stocks to Bet On
We are presenting three stocks that are well poised togrow in the near term.
WNS (Holdings) Limited: The business process management (“BPM”) company offers data, voice and analytical and business transformation services and currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
WNS is trying to meet the pandemic-induced digital transformation trends by investing in digital capabilities that streamline clients’ operations and enhance decision making through data and analytics. Investments are mainly focused on creation and innovation labs, specialized centers of excellence and industry-specific digital offerings.
The company’s opportunities in the BPM space are also on the rise, with clients’ growing need to use analytics and industry-specific expertise for transforming their business models.
The Zacks Consensus Estimate for the ongoing year’s EPS has been revised 0.3% upward over the past 60 days.
Price and Consensus: WNS
Avis Budget Group: The company is a provider of car and truck rentals, car sharing, and ancillary products and services, and currently carries a Zacks Rank #2 (Buy).
Avis Budget operates through distinct global brands that focus on different market segments and complement other brands in their respective regional markets. The company’s ability to cater to a wide range of mobility demands helps it expand and strengthen its global foothold through organic growth.
The company remains focused on expanding its connected vehicles fleet, as this allows cost reduction and streamlining of operations. This also enables enhanced tracking of idle vehicles and automated processing of ready-to-rent cars.
The Zacks Consensus Estimate for the ongoing year’s EPS has been revised 9.1% upward over the past 60 days.
Price and Consensus: CAR
BGSF: This provider of workforce solutions and placement services also carries a Zacks Rank #2. The company’s Real Estate segment is expected to benefit from market recovery and rapid increase in demand. Its Professional segment is expected to benefit from strong activity in IT Consulting and Managed Services sectors.
The Zacks Consensus Estimate for the ongoing year’s EPS has remained unchanged at $1.04 in the past 60 days.
Price and Consensus: BGSF