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3 Top Business Services Stocks Braving Industry Challenges
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Rise in manufacturing and service activities, along with increased technology adoption and the 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) , BGSF, Inc. (BGSF - Free Report) and Viad Corp (VVI - Free Report) to sail through the pandemic-related challenges.
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 business 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, data-driven decision-making and enhanced cybersecurity. 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 formulating and reassessing strategic initiatives.
What's Shaping the Future of the Business Services Industry?
Demand Stability: The industry is mature, with demand for services in good shape for a while now. 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 28 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 Bleak Near-Term Prospects
The Business-Services industry is housed within the broader Business Services sector. It carries a Zacks Industry Rank #170, which places it in the bottom 32% 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 dull 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.
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.
Industrys Price Performance
Over the past year, the Zacks Business Services industry has declined 48.2% compared with the S&P 500 composite’s fall of 18.1%. The broader sector has declined 43.9% 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 16.81 compared with the S&P 500’s 16.65 and the sector’s 22.67.
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 to grow in the near term.
BGSF: This provider of workforce solutions and placement services carries a Zacks Rank #2 (Buy).
BGSF’s Real Estate segment is benefiting from market recovery leading to a strong demand environment. Its Professional segment is benefiting from strong activity in finance and accounting, IT consulting, and managed services.
The Zacks Consensus Estimate for the 2022 EPS has remained unchanged at $1.07 in the past 60 days.
WNS (Holdings) Limited:This business process management (“BPM”) company offers data, voice and analytical and business transformation services and currently carries a Zacks Rank #2.
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. Its 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 1.3% upward over the past 60 days.
Price and Consensus: WNS
Viad Corp: This experiential leisure travel, and live events and marketing services company also carries a Zacks Rank #2. The company is currently witnessing strong momentum across its business, driven mainly by the recovery of in-person event activity from the pandemic blues.
The Zacks Consensus Estimate for the ongoing year’s bottom line has remained unchanged at 95 cents in the past 60 days.
Price and Consensus: VVI
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3 Top Business Services Stocks Braving Industry Challenges
Rise in manufacturing and service activities, along with increased technology adoption and the 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) , BGSF, Inc. (BGSF - Free Report) and Viad Corp (VVI - Free Report) to sail through the pandemic-related challenges.
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 business 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, data-driven decision-making and enhanced cybersecurity. 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 formulating and reassessing strategic initiatives.
What's Shaping the Future of the Business Services Industry?
Demand Stability: The industry is mature, with demand for services in good shape for a while now. 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 28 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 Bleak Near-Term Prospects
The Business-Services industry is housed within the broader Business Services sector. It carries a Zacks Industry Rank #170, which places it in the bottom 32% 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 dull 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.
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.
Industrys Price Performance
Over the past year, the Zacks Business Services industry has declined 48.2% compared with the S&P 500 composite’s fall of 18.1%. The broader sector has declined 43.9% 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 16.81 compared with the S&P 500’s 16.65 and the sector’s 22.67.
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 to grow in the near term.
BGSF: This provider of workforce solutions and placement services carries a Zacks Rank #2 (Buy).
BGSF’s Real Estate segment is benefiting from market recovery leading to a strong demand environment. Its Professional segment is benefiting from strong activity in finance and accounting, IT consulting, and managed services.
The Zacks Consensus Estimate for the 2022 EPS has remained unchanged at $1.07 in the past 60 days.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: BGSF
WNS (Holdings) Limited:This business process management (“BPM”) company offers data, voice and analytical and business transformation services and currently carries a Zacks Rank #2.
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. Its 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 1.3% upward over the past 60 days.
Price and Consensus: WNS
Viad Corp: This experiential leisure travel, and live events and marketing services company also carries a Zacks Rank #2. The company is currently witnessing strong momentum across its business, driven mainly by the recovery of in-person event activity from the pandemic blues.
The Zacks Consensus Estimate for the ongoing year’s bottom line has remained unchanged at 95 cents in the past 60 days.
Price and Consensus: VVI