Business services providers play a critical role for enterprises, assisting them with everything from new hardware integrations to consulting and marketing. These firms have helped their customers unlock huge efficiencies, so it’s no surprise the industry has posted a 10.7% gain over the past six months, beating the S&P 500 by 2.3 percentage points.
Although these companies have produced results, only a handful will thrive over the long term as AI-driven upstarts are rapidly taking share from the incumbents. Taking that into account, here are three services stocks boasting durable advantages.
Coherent (COHR)
Market Cap: $71.13 billion
Created through the 2022 rebranding of II-VI Incorporated, a company with roots dating back to 1971, Coherent (NYSE: COHR) develops and manufactures advanced materials, lasers, and optical components for applications ranging from telecommunications to industrial manufacturing.
Why Does COHR Catch Our Eye?
- Annual revenue growth of 19.8% over the last two years was superb and indicates its market share increased during this cycle
- Projected revenue growth of 34.9% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 82.4% annually
At $386.58 per share, Coherent trades at 48.8x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Plexus (PLXS)
Market Cap: $7.70 billion
With over 20,000 team members across 26 global facilities, Plexus (NASDAQ: PLXS) designs, manufactures, and services complex electronic products for companies in aerospace/defense, healthcare, and industrial sectors.
Why Is PLXS Interesting?
- Market share is on track to rise over the next 12 months as its 17.7% projected revenue growth implies demand will accelerate from its two-year trend
- Share repurchases over the last two years enabled its annual earnings per share growth of 28.9% to outpace its revenue gains
- ROIC punches in at 15.4%, illustrating management’s expertise in identifying profitable investments
Plexus is trading at $295.03 per share, or 32.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
Grid Dynamics (GDYN)
Market Cap: $537.7 million
With engineering centers across the Americas, Europe, and India serving Fortune 1000 companies, Grid Dynamics (NASDAQ: GDYN) provides technology consulting, engineering, and analytics services to help large enterprises modernize their technology systems and business processes.
Why Will GDYN Outperform?
- Annual revenue growth of 15.3% over the last two years was superb and indicates its market share increased during this cycle
- Earnings per share have massively outperformed its peers over the last five years, increasing by 20.4% annually
- Improving returns on capital suggest its past investments are beginning to deliver value
Grid Dynamics’s stock price of $6.38 implies a valuation ratio of 13.6x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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