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 20% over the past six months. At the same time, the S&P 500 was up 12.1%.
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. Taking that into account, here is one services stock poised to generate sustainable market-beating returns and two we’re steering clear of.
Two Business Services Stocks to Sell:
Vestis (VSTS)
Market Cap: $1.65 billion
Operating a network of more than 350 facilities with 3,300 delivery routes serving customers weekly, Vestis (NYSE: VSTS) provides uniform rentals, workplace supplies, and facility services to over 300,000 business locations across the United States and Canada.
Why Should You Sell VSTS?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.2% annually over the last two years
- Projected sales for the next 12 months are flat and suggest demand will be subdued
- Earnings per share have contracted by 50.8% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
Vestis’s stock price of $12.48 implies a valuation ratio of 17.3x forward P/E. Read our free research report to see why you should think twice about including VSTS in your portfolio.
People (PPLI)
Market Cap: $2.85 billion
Originally known as InterActiveCorp and built through Barry Diller's strategic acquisitions since the 1990s, People (NASDAQ: PPLI) operates a portfolio of category-leading digital businesses including Dotdash Meredith, Angi, and Care.com, focusing on digital publishing, home services, and caregiving platforms.
Why Is PPLI Risky?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 7.2% annually over the last five years
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
People is trading at $38.28 per share, or 14.6x forward P/E. If you’re considering PPLI for your portfolio, see our FREE research report to learn more.
One Business Services Stock to Watch:
Grid Dynamics (GDYN)
Market Cap: $647.4 million
With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ: GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.
Why Are We Positive on GDYN?
- Impressive 15.2% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Earnings per share grew by 14% annually over the last two years, comfortably beating the peer group average
- Rising returns on capital show the company is starting to reap the benefits of its past investments
At $8 per share, Grid Dynamics trades at 16.4x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Stocks We Like Even More
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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.
