Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. Still, investors are uneasy as firms face challenges from AI-driven disruptors and tightening corporate budgets. These doubts have certainly contributed to services stocks’ recent underperformance - over the past six months, the industry’s 2.7% gain has fallen behind the S&P 500’s 13% rise.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one resilient services stock at the top of our wish list and two we’re passing on.
Two Business Services Stocks to Sell:
Cogent (CCOI)
Market Cap: $878.1 million
Operating a massive network spanning 20,000 miles of fiber optic cable and connecting to over 3,200 buildings worldwide, Cogent Communications (NASDAQ: CCOI) provides high-speed Internet access, private network services, and data center colocation to businesses and bandwidth-intensive organizations across 54 countries.
Why Do We Think Twice About CCOI?
- Number of total connections has disappointed over the past two years, indicating weak demand for its offerings
- Eroding returns on capital suggest its historical profit centers are aging
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
Cogent is trading at $18.78 per share, or 2.6x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including CCOI in your portfolio.
Hewlett Packard Enterprise (HPE)
Market Cap: $28.01 billion
Born from the 2015 split of the iconic Silicon Valley pioneer Hewlett-Packard, Hewlett Packard Enterprise (NYSE: HPE) provides edge-to-cloud technology solutions that help businesses capture, analyze, and act upon their data across hybrid IT environments.
Why Does HPE Worry Us?
- Annual sales growth of 4.2% over the last five years lagged behind its business services peers as its large revenue base made it difficult to generate incremental demand
- Earnings per share fell by 7.5% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- ROIC of 2.9% reflects management’s challenges in identifying attractive investment opportunities
Hewlett Packard Enterprise’s stock price of $21.22 implies a valuation ratio of 10.1x forward P/E. If you’re considering HPE for your portfolio, see our FREE research report to learn more.
One Business Services Stock to Buy:
OSI Systems (OSIS)
Market Cap: $4.53 billion
With security scanners deployed at airports and borders worldwide and patient monitors used in hospitals across the globe, OSI Systems (NASDAQ: OSIS) designs and manufactures specialized electronic systems for security screening, patient monitoring, and optoelectronic applications.
Why Are We Backing OSIS?
- Annual revenue growth of 16.6% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 23.4% over the last two years outstripped its revenue performance
- Free cash flow margin increased by 2.4 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $267.05 per share, OSI Systems trades at 25.9x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.
Stocks We Like Even More
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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