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3 Top Stocks From the Thriving Business Services Industry
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Economic recovery leading to 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 Everi Holdings (EVRI - Free Report) , Avis Budget Group (CAR - Free Report) and HeadHunter Group (HHR - 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 key focus within the industry is currently on channelizing money and efforts toward more effective operational components, such as technology, digital transformation, data-driven decision-making and enhanced cybersecurity. To position themselves suitably in the post-pandemic era, service providers are increasing their efforts toward formulating and reassessing strategic initiatives, identifying sources of demand and targeting end markets.
What's Shaping the Future of the Business Services Industry?
Economic Recovery: The industry is a major beneficiary of manufacturing and service activities which, in turn, are dependent on the economic health. Notably, a steady economic recovery is evident from the latest first-quarter 2021 GDP number, which according to the "third" estimate released by the Bureau of Economic Analysis, increased at an annual rate of 6.4% compared with the 4.3% increase in the fourth quarter of 2020. Economic activity in the manufacturing sector expanded 0.5% from April to May, as the Manufacturing PMI measured by Institute for Supply Management (ISM) touched 61.2%, clocking the 12th consecutive month of expansion. Non-manufacturing activities clocked 1.3% growth from April to May, as the Services PMI measured by ISM touched the all-time high of 64% and registered the 12th consecutive month of expansion.
Demand Stability: The industry is mature with demand for services being in good shape over time. Revenues, income and cash flows are anticipated to steadily make way to the pre-pandemic healthy levels, helping most industry players pay out stable dividends.
Relaxing Immigration Restrictions: Higher talent costs due to a competitive talent market, especially under the Trump-era restrictions on immigration, have been a headwind for the industry. However, President Joe Biden’s ongoing moves to lift the Trump-era ban on legal immigration will help service providers thrive with increased flow of foreign talent.
Zacks Industry Rank Indicates Strong Prospects
The Business-Services industry is housed within the broader Business Services sector. It carries a Zacks Industry Rank #118, which places it in the top 47% 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 underperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
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 Underperforms Sector and the S&P 500
Over the past year, the Zacks Business Services industry has underperformed the S&P 500 composite and the broader sector.
While the industry has gained 4.2%, the S&P 500 composite has rallied 42.7% and the broader sector 4.6%.
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 30.71 compared with the S&P 500’s 21.85 and the sector’s 30.56.
Over the past five years, the industry has traded as high as 30.71X, as low as 19.04X and at the median of 21.1X, as the charts below show.
Everi Holdings Inc.: The company is a provider of entertainment and technology solutions for casino and digital gaming. It is currently benefiting from its organic growth initiatives and ongoing recovery in the gaming space. While continued focus on improvement of operating efficiency and product innovation is aiding the bottom line, the top line is gaining from investments in development of player popular games and digital solutions.
The Zacks Consensus Estimate for 2021 EPS has moved more than 100% north in 60 days’ time. Shares of the company have rallied a whopping 274% in the past year.
Price and Consensus: EVRI
Avis Budget Group, Inc.: The company is a provider car and truck rentals, car sharing, and ancillary services. It is currently focusing on boosting the top line through enhancing customer experience with the help of technology and improved service quality. Avis Budget is targeting margin improvement through controlling fixed and variable expenses.
The Zacks Consensus Estimate for the current-year EPS moved up more than 100% in the past 60 days. The stock has skyrocketed 252% in a year’s time.
Price and Consensus: CAR
HeadHunterGroup PLC: The company operates an online recruitment platform globally. Its business is benefiting from increasing demand for online platforms and resultant addition of customers. The acquisition of cloud-based HCMsoftware provider Skillaz will likely help the company expand in the market for enterprise solution.
The Zacks Consensus Estimate for the ongoing year’s EPS has been revised 5% upward over the past 60 days. The stock has gained 78.5% over the past year.
Price and Consensus: HHR
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
Image: Bigstock
3 Top Stocks From the Thriving Business Services Industry
Economic recovery leading to 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 Everi Holdings (EVRI - Free Report) , Avis Budget Group (CAR - Free Report) and HeadHunter Group (HHR - 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 key focus within the industry is currently on channelizing money and efforts toward more effective operational components, such as technology, digital transformation, data-driven decision-making and enhanced cybersecurity. To position themselves suitably in the post-pandemic era, service providers are increasing their efforts toward formulating and reassessing strategic initiatives, identifying sources of demand and targeting end markets.
What's Shaping the Future of the Business Services Industry?
Economic Recovery: The industry is a major beneficiary of manufacturing and service activities which, in turn, are dependent on the economic health. Notably, a steady economic recovery is evident from the latest first-quarter 2021 GDP number, which according to the "third" estimate released by the Bureau of Economic Analysis, increased at an annual rate of 6.4% compared with the 4.3% increase in the fourth quarter of 2020. Economic activity in the manufacturing sector expanded 0.5% from April to May, as the Manufacturing PMI measured by Institute for Supply Management (ISM) touched 61.2%, clocking the 12th consecutive month of expansion. Non-manufacturing activities clocked 1.3% growth from April to May, as the Services PMI measured by ISM touched the all-time high of 64% and registered the 12th consecutive month of expansion.
Demand Stability: The industry is mature with demand for services being in good shape over time. Revenues, income and cash flows are anticipated to steadily make way to the pre-pandemic healthy levels, helping most industry players pay out stable dividends.
Relaxing Immigration Restrictions: Higher talent costs due to a competitive talent market, especially under the Trump-era restrictions on immigration, have been a headwind for the industry. However, President Joe Biden’s ongoing moves to lift the Trump-era ban on legal immigration will help service providers thrive with increased flow of foreign talent.
Zacks Industry Rank Indicates Strong Prospects
The Business-Services industry is housed within the broader Business Services sector. It carries a Zacks Industry Rank #118, which places it in the top 47% 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 underperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
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 Underperforms Sector and the S&P 500
Over the past year, the Zacks Business Services industry has underperformed the S&P 500 composite and the broader sector.
While the industry has gained 4.2%, the S&P 500 composite has rallied 42.7% and the broader sector 4.6%.
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 30.71 compared with the S&P 500’s 21.85 and the sector’s 30.56.
Over the past five years, the industry has traded as high as 30.71X, as low as 19.04X and at the median of 21.1X, 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 currently carry a Zacks Rank #2 (Buy) and are well poised to grow in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Everi Holdings Inc.: The company is a provider of entertainment and technology solutions for casino and digital gaming. It is currently benefiting from its organic growth initiatives and ongoing recovery in the gaming space. While continued focus on improvement of operating efficiency and product innovation is aiding the bottom line, the top line is gaining from investments in development of player popular games and digital solutions.
The Zacks Consensus Estimate for 2021 EPS has moved more than 100% north in 60 days’ time. Shares of the company have rallied a whopping 274% in the past year.
Price and Consensus: EVRI
Avis Budget Group, Inc.: The company is a provider car and truck rentals, car sharing, and ancillary services. It is currently focusing on boosting the top line through enhancing customer experience with the help of technology and improved service quality. Avis Budget is targeting margin improvement through controlling fixed and variable expenses.
The Zacks Consensus Estimate for the current-year EPS moved up more than 100% in the past 60 days. The stock has skyrocketed 252% in a year’s time.
Price and Consensus: CAR
HeadHunterGroup PLC: The company operates an online recruitment platform globally. Its business is benefiting from increasing demand for online platforms and resultant addition of customers. The acquisition of cloud-based HCMsoftware provider Skillaz will likely help the company expand in the market for enterprise solution.
The Zacks Consensus Estimate for the ongoing year’s EPS has been revised 5% upward over the past 60 days. The stock has gained 78.5% over the past year.
Price and Consensus: HHR
Bitcoin, Like the Internet Itself, Could Change Everything
Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.
Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.
See 3 crypto-related stocks now >>