Business services providers use their specialized expertise to help enterprises streamline operations and cut costs. But cutbacks in corporate spending and the threat of new AI products have kept sentiment in check, and over the past six months, the industry has tumbled by 2.1%. This performance was disappointing since the S&P 500 climbed 5.4%.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here are three services stocks boasting durable advantages.
Copart (CPRT)
Market Cap: $45.57 billion
Starting as a single salvage yard in California in 1982, Copart (NASDAQ:CPRT) operates an online auction platform that connects sellers of damaged and salvage vehicles with buyers ranging from dismantlers and rebuilders to used car dealers and exporters.
Why Are We Bullish on CPRT?
- Annual revenue growth of 15.6% over the last five years was superb and indicates its market share increased during this cycle
- Incremental sales over the last five years have been highly profitable as its earnings per share increased by 19.6% annually, topping its revenue gains
- CPRT is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its growing cash flow gives it even more resources to deploy
Copart’s stock price of $47.34 implies a valuation ratio of 27.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Barrett (BBSI)
Market Cap: $1.12 billion
Operating as a professional employer organization (PEO) that serves over 8,000 companies with more than 120,000 worksite employees, Barrett Business Services (NASDAQ:BBSI) provides management solutions that help small and mid-sized businesses handle human resources, payroll, workers' compensation, and other administrative functions.
Why Could BBSI Be a Winner?
- Operating margin improvement of 1.1 percentage points over the last five years demonstrates its ability to scale efficiently
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are climbing as it finds even more attractive growth opportunities
- Improving returns on capital reflect management’s ability to monetize investments
Barrett is trading at $43.61 per share, or 19.3x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
IMAX (IMAX)
Market Cap: $1.50 billion
Originally developed for World Expo '67 in Montreal as an innovative projection system, IMAX (NYSE:IMAX) provides proprietary large-format cinema technology and systems that deliver immersive movie experiences with enhanced image quality and sound.
Why Should You Buy IMAX?
- Annual revenue growth of 19.7% over the past five years was outstanding, reflecting market share gains this cycle
- Free cash flow flipped to positive over the last five years, indicating the company has passed a significant test
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
At $27.78 per share, IMAX trades at 22.3x 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
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 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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