The coronavirus outbreak has almost brought the global economy to a standstill in the past three months. Lockdowns imposed by most of the governments including the U.S. government significantly disrupted normal economic activities.
Each and every sector of the economy witnessed steep downtrend including business services. However, a closer look into the sector reveals a handful of stocks that have skyrocketed in the past three months.
Mixed Performance in the Past Three Months
The business services sector comprises industries including consulting, staffing, financial tractions, outsourcing, advertising, waste removal, building maintenance, technology services and auction/valuation services. Overall the sector has declined 13.4% year to date.
Despite the overall negative trend, technology services, consulting services and auction/valuation services industries have done better than the broader market.
Meanwhile, companies that provide business services have performed much better than the S&P 500 index so far with respect to first-quarter 2020 earnings results.
As of May 13, 96.4% business services companies within the S&P 500 index reported results. Total earnings of these companies were up 9% from the same period last year on 7.4% higher revenues. Meanwhile, total earnings of the S&P 500 index was down 10.6% from the same period last year on 1.1% higher revenues.
Technology service's industry’s growth is expected to accelerate in the days ahead on increasing number of remote workers in the wake of the coronavirus crisis-induced work-from-home wave. Further, increasing mobile workers, courtesy of the ongoing workspace trend of Bring Your Own Device, have been benefiting the industry players for quite some time.
In this era of digital transformation, enterprises are actively seeking a common ground between on-premise and cloud infrastructures that will enable them to provide flexible and easily adoptable hybrid solutions.
Moreover, consulting services outlook remains bright despite the coronavirus-induced crisis. This is because organizations are increasingly seeking consultation amid such a volatile scenario in a bid to protect employees, and stay close to customers and shareholders.
Further, the industry is one of the pioneers of remote working. The nature of work allows industry players to get the job done through increased use of technology.
Additionally, business software industry is benefiting from robust demand for multi cloud-enabled software solutions, given the ongoing transition from legacy platforms to modern cloud-based infrastructure.
The industry players are incorporating artificial intelligence and tools like machine learning in their applications to make the same more dynamic and result-oriented. Elevated demand for enterprise software, which is ramping up productivity and improving decision-making process, is a key catalyst.
Our Top Picks
We have narrowed down our search to five business services stocks that have strong growth potential and rallied more than 15% in the past three months. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past three months.
Riot Blockchain Inc. (RIOT - Free Report) is focused on building, supporting and operating blockchain technologies ecosystem. It is involved in digital currency mining operation, which utilizes specialized computers that generate digital currency primarily bitcoin. The Zacks Rank #2 company has expected earnings growth of 30.4% for the current year. The stock price has jumped 39% in the past three months.
DocuSign Inc. (DOCU - Free Report) provides cloud based software in the United States. It offers services to mortgage, non-profit, government, real estate, insurance, technology and healthcare industries. The Zacks Rank #2 company has expected earnings growth of 71% for the current year (ending January 2021). The stock price has appreciated 36.4% in the past three months.
iClick Interactive Asia Group Ltd. (ICLK - Free Report) provides an online marketing technology platform. It offers digital marketing, data analysis, display solutions, software development and other services. The Zacks Rank #2 company has expected earnings growth of 25% for the current year. The stock price has climbed 32% in the past three months.
PFSweb Inc. (PFSW - Free Report) provides omni-channel commerce solutions in the United States, Europe, Canada and India. It operates through two segments — LiveArea Professional Services and PFS Operations. The Zacks Rank #1 company has expected earnings growth of 80% for the current year. The stock price has surged 30.6% in the past three months.
Liquidity Services Inc. (LQDT - Free Report) provides innovative e-commerce marketplace solutions to manage, value and sell inventory and equipment for business and government clients. The Zacks Rank #2 company has expected earnings growth of 96.4% for next year (ending September 2021). The stock price has advanced 17.3% in the past three months.
Zacks Top 10 Stocks for 2020
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