3 Services Stocks with Mounting Challenges

Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. But cutbacks in corporate spending and the threat of new AI products have kept sentiment in check, and over the past six months, the industry has tumbled by 6.3%. This performance was discouraging since the S&P 500 held its ground.

Investors should tread carefully as many of these companies are also cyclical, and any misstep can have you catching a falling knife. Taking that into account, here are three services stocks best left ignored.

Liberty Broadband (LBRDK)

Market Cap: $14.36 billion

Operating across the United States, Liberty Broadband (NASDAQ:LBRDK) is a provider of high-speed internet, cable television, and telecommunications services across various markets.

Why Should You Sell LBRDK?

1. Annual revenue growth of 2.7% over the last two years was below our standards for the business services sector
2. Free cash flow margin dropped by 34.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders

At $100.33 per share, Liberty Broadband trades at 57.3x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including LBRDK in your portfolio.

Coherent (COHR)

Market Cap: $12.35 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 Do We Think Twice About COHR?

1. Earnings per share fell by 4.9% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
2. Free cash flow margin dropped by 11.5 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. ROIC of 3.8% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

Coherent is trading at $79.59 per share, or 19.3x forward P/E. To fully understand why you should be careful with COHR, check out our full research report (it’s free).

CRA (CRAI)

Market Cap: $1.30 billion

Often retained for high-stakes matters with multibillion-dollar implications, CRA International (NASDAQ:CRAI) provides economic, financial, and management consulting services to corporations, law firms, and government agencies for litigation, regulatory proceedings, and business strategy.

Why Does CRAI Worry Us?

1. Smaller revenue base of $697.5 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
2. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 11 percentage points

CRA’s stock price of $191.25 implies a valuation ratio of 23.9x forward P/E. If you’re considering CRAI for your portfolio, see our FREE research report to learn more.

Stocks We Like More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking 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 176% over the last five years.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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.