Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. But increasing competition from AI-driven upstarts has tempered enthusiasm, and over the past six months, the industry has pulled back by 7.9%. This drop was disappointing since the S&P 500 climbed 1.1%.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. With that said, here is one services stock boasting a durable advantage and two that may face trouble.
Two Business Services Stocks to Sell:
Lumen (LUMN)
Market Cap: $6.72 billion
With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE: LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.
Why Should You Sell LUMN?
- Sales tumbled by 9.7% annually over the last five years, showing market trends are working against its favor during this cycle
- Sales were less profitable over the last five years as its earnings per share fell by 15.8% annually, worse than its revenue declines
- Free cash flow margin shrank by 10.5 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
Lumen is trading at $6.54 per share, or 7.3x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why LUMN doesn’t pass our bar.
Amentum (AMTM)
Market Cap: $6.60 billion
With operations spanning approximately 80 countries and a workforce of specialized engineers and technical experts, Amentum Holdings (NYSE: AMTM) provides advanced engineering and technology solutions to U.S. government agencies, allied governments, and commercial enterprises across defense, energy, and space sectors.
Why Does AMTM Give Us Pause?
- Annual sales growth of 2.6% over the last two years lagged behind its business services peers as its large revenue base made it difficult to generate incremental demand
- Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $27.25 per share, Amentum trades at 11.2x forward P/E. Read our free research report to see why you should think twice about including AMTM in your portfolio.
One Business Services Stock to Buy:
Brady (BRC)
Market Cap: $3.95 billion
Founded in 1914 and evolving through more than a century of industrial innovation, Brady (NYSE: BRC) manufactures and supplies identification solutions and workplace safety products that help companies identify and protect their premises, products, and people.
Why Is BRC a Good Business?
- 8.3% annual revenue growth over the last two years surpassed the sector average as its services resonated with customers
- Performance over the past five years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Strong free cash flow margin of 10.9% enables it to reinvest or return capital consistently, and its recently improved profitability means it has even more resources to invest or distribute
Brady’s stock price of $83.66 implies a valuation ratio of 16.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
