For Immediate Release
Chicago, IL – March 1, 2021 – Today, Zacks Equity Research discusses Business Services, including comScore, Inc. (
SCOR Quick Quote SCOR - Free Report) , General Finance Corporation ( GFN Quick Quote GFN - Free Report) and WNS (Holdings) Limited ( WNS Quick Quote WNS - Free Report) .
Rise in manufacturing and service activities, along with the increased adoption and success of the work-from-home trend, is enabling the Zacks
Business-Services industry to support the demand environment that is getting healthier with the gradual economic recovery.However,the industry is still significantly weak when compared with the pre-pandemic level.
Service essentiality, innovation and technology enhancements are helping
comScore, General Finance Corp. and WNS (Holdings) Ltd. to sail through these testing times. 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.
What’s Shaping the Future of the Business Services Industry? The industry is mature with demand for services being in good shape over time. Revenues, income and cash flows have been increasing for the past few years, backing most industry players to pay out stable dividends. Demand Stability: With the coronavirus pandemic disrupting the economy, demand for business services has dropped in the past few months. However, with the economy gradually swinging back to normalcy, and both manufacturing and service activities gathering steam, demand is anticipated to pick up steadily. Although manufacturing activities edged down 1.8% from December to January, with the Manufacturing PMI measured by Institute for Supply Management (ISM) touching 58.7%, the reading stayed well above 50 — reflecting growth in the manufacturing sector. Economic Recovery:
This is the eighth consecutive month of expansion after contraction in March, April, and May. Notably, economic activity in the non-manufacturing sector expanded 1% from December to January as the Services PMI measured by ISM touched 58.7%. This is the eighth consecutive month of expansion after April’s contraction that had interrupted an impressive growth rally of 132 consecutive months.
Higher talent costs due to a competitive talent market and restrictions on immigration amid the pandemic will continue being headwinds for the industry. Further, service providers face regulatory hurdles and compliance-related issues due to operations spread across the globe. Heightening Immigration Restrictions: Zacks Industry Rank Indicates Dull Prospects
The Business-Services Industry is housed within the broader
Business Services sector. It carries a Zacks Industry Rank #176, which places it in the bottom 30% of more than 250 Zacks industries.
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.
The sell-side analysts covering the companies in this industry have been steadily lowering their estimates. In the past year, the industry’s consensus earnings estimate for 2021 has moved 34.4% south.
Despite the gloomy prospects, we present a few stocks that you may want to consider for your portfolio. Nonetheless, prior to that, it’s worth taking a look at the industry’s performance and current valuation.
Industry Underperforms the S&P 500 and Sector
The Zacks Business-Services industry has underperformed the S&P 500 composite as well as the broader Zacks Business Services sector over the past year.
The industry has rallied 5.9% during this period as against the S&P 500 composite’s rally of 34.1% and the broader sector’s growth of 6.1%.
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 29.99 compared with the S&P 500’s 22.15 and the sector’s 29.8.
Over the past five years, the industry has traded as high as 30.89X, as low as 18.81X and at the median of 21.65X.
3 Business Services Stocks to Consider
We are presenting three stocks that currently carry a Zacks Rank #2 (Buy) or a Zacks Rank #3 (Hold), and are well poised to grow in the near term. You can see
the complete list of today’s Zacks #1 Rank stocks here. comScore, Inc. : It isan information and analytics company that measures audiences, consumer behavior, and advertising across media platforms globally. comScore continues to innovate and develop new measurement products and services, and new relationships in the advertising space. The company’s local and television businesses, and core digital services are in good shape.
comScore currently carries a Zacks Rank of 2. The Zacks Consensus Estimate for the 2021 EPS has moved 13.3% north in 60 days’ time. Shares of the company have rallied 25.9% in the past year.
General Finance Corp.: The company is a provider of portable storage, modular space and liquid containment solutions. Its business has been considered essential and therefore, remained open across all of the company’s locations working under flexible work practices. General Finance has seen strength in its core container business amid the pandemic and implemented cost-containment measures.
General Finance carries Zacks Rank #3, at present. The Zacks Consensus Estimate for the current-year EPS has moved up 50% in the past 60 days. The stock has appreciated 30.6% in a year’s time.
WNS (Holdings) Ltd.: The company offers data, voice and analytical and business transformation services. While the pandemic has had a negative impact on the firm’s top line, its margins and free cash flow are healthy. This is mainly because WNS has successfully synced its delivery model with the work-from-home approach.
The Zacks Consensus Estimate for the ongoing year’s EPS has been revised 10.2% upward over the past 60 days. The stock has gained 15.8% over the past year. WNS carries Zacks Rank #3, currently.
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