|
|
|
|
|||||
|
|
|
About the Industry
The Zacks Business-Services industry includes companies that deliver diverse offerings such as specialty rentals, supply chain solutions, e-commerce support, technology services, document and data management, digital audience measurement, voice and analytics services, and business transformation solutions. The pandemic reshaped how these firms operate and interact with clients. In response, the industry's current emphasis is on streamlining operations through digital transformation, technology integration, data-driven strategies, and stronger cybersecurity. As the economy recovers, service providers are actively refining their strategic approaches to capitalize on emerging opportunities. This involves reassessing business priorities, pinpointing growth drivers, and targeting specific end markets to remain competitive.
What's Shaping the Future of the Business Services Industry?
Strong Service Activities: The sector continues to draw strength from sustained and evolving service-driven activity. In June, economic activity within the services sector rebounded after a brief one-month contraction. The Services PMI, as reported by the Institute for Supply Management, stood at 50.8%, indicating expansion. Notably, the index has remained above the key 50% mark in 11 of the past 12 months.
Demand Stability: Having evolved into a mature and resilient ecosystem, the industry continues to experience consistent demand for its services. In this post-pandemic era, revenues, operating income, and cash flows have not only recovered but surpassed pre-pandemic levels. This financial strength has positioned most industry players to sustain reliable dividend payouts, reinforcing long-term investor confidence in a structurally sound and future-ready sector.
AI Advancement: The rapid advancement and adoption of artificial intelligence and automation technologies are reshaping how business services are delivered. While these innovations promise enhanced efficiency, cost reduction, and faster turnaround times, they also pose challenges such as workforce displacement and the need for constant upskilling. Companies that effectively integrate AI while managing the human impact will likely lead the future of the industry.
Zacks Industry Rank Indicates Solid Near-Term Prospects
The Business-Services industry is housed within the broader Business Services sector. It carries a Zacks Industry Rank #94, which places it in the top 38% of 246 Zacks industries.
The group’s Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.
Industry's Price Performance
The Zacks Business Services industry has outperformed the broader sector but underperformed the S&P 500 in the past 12-month period.
The industry has risen 11.3% compared with the S&P 500 composite’s growth of 17.2%. The broader sector has returned 10.5% over the same time frame.
.jpg)
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 27.51X compared with the S&P 500’s 22.78X and the sector’s 21.41X.
Over the past five years, the industry has traded as high as 28.8X and as low as 26.24X, with the median being 27.51X, as the charts below show.
.jpg)
.jpg)
3 Service Stocks in Focus
We have presented three stocks that are well-positioned to grow in the near term.
APi Group: This provider of safety and specialty services worldwide had a confident and disciplined start to 2025, with a return to traditional levels of organic growth following a deliberate pruning of lower-value customer accounts in 2024. This strategic focus has enabled the company to enhance margin performance while pursuing M&A activity and share repurchases.
The company's strong backlog, adaptable cost structure, and exposure to statutorily mandated service demand across diverse global end markets provide a resilient foundation. These factors act as a protective moat, helping APi Group withstand macroeconomic headwinds such as shifting tariff conditions. With a clear focus on achieving its “13/60/80” performance targets and unveiling higher long-term goals at its upcoming investor day, APi is poised for sustained, value-driven growth.
APG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2025 bottom line has increased 4% to $1.41 in the past 60 days. APGshares have gained 36% in the past year.
Price and Consensus: APG
Aramark: This food and facilities services provider is demonstrating strong business momentum as it moves into the second half of its fiscal year. The company is benefiting from record-high client retention, a clear indicator of customer satisfaction and long-term partnership strength. CEO John Zillmer highlighted significant new client wins and accelerating monthly revenue growth, underscoring Aramark’s growing market demand.
Despite broader market fluctuations, the company continues to manage challenges effectively, thanks to its resilient business model and diversified portfolio. Aramark’s performance is fueled by a dedicated workforce, a robust supply chain, and a hospitality-driven culture that prioritizes exceptional client service.
ARMK carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2025 EPS has remained unchanged at $1.94 in the past 60 days. The stock gained 26% in the past year.
Mitie: Mitie Group delivers facilities management and professional services across the United Kingdom and internationally.
The company kicked off its fiscal year with strong momentum, reflecting its solid position in the market and operational strength. The company reported double-digit revenue growth in the first quarter, underlining robust demand and effective execution. Its core Facilities Management segment grew by 7.3%, driven by successful contract wins and renewals across key accounts.
Additionally, Facilities Transformation, which includes high-impact client projects, delivered impressive growth of 12.8%, even when measured against a strong prior-year comparison. This performance highlights MITIE’s ability to adapt and deliver value-added solutions, positioning the company for sustained success. The solid start to the fiscal year reinforces confidence in the company’s strategy, its focus on innovation, and its ability to capture opportunities in a dynamic facilities services market.
MITFY currently carries a Zacks Rank #2. The Zacks Consensus Estimate for fiscal 2026 EPS has increased 4% to 72 cents in the past 60 days. MITFY shares have soared 13% in the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
This article originally published on Zacks Investment Research (zacks.com).
| 5 hours | |
| 9 hours | |
| 15 hours | |
| Jul-31 | |
| Jul-31 | |
| Jul-31 | |
| Jul-31 | |
| Jul-31 | |
| Jul-31 | |
| Jul-31 | |
| Jul-30 | |
| Jul-30 | |
| Jul-30 | |
| Jul-30 | |
| Jul-30 |
Join thousands of traders who make more informed decisions with our premium features. Real-time quotes, advanced visualizations, backtesting, and much more.
Learn more about FINVIZ*Elite