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 9.4% gain has fallen behind the S&P 500’s 14.7% rise.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here are two services stocks we think can generate sustainable market-beating returns and one best left ignored.
One Business Services Stock to Sell:
Insperity (NSP)
Market Cap: $1.33 billion
Pioneering the professional employer organization (PEO) industry it helped establish, Insperity (NYSE:NSP) provides human resources outsourcing services to small and medium-sized businesses, handling payroll, benefits, compliance, and HR administration.
Why Do We Pass on NSP?
- Sales trends were unexciting over the last two years as its 2.8% annual growth was below the typical business services company
- Earnings per share fell by 18.7% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.3 percentage points
Insperity’s stock price of $35.37 implies a valuation ratio of 18.5x forward P/E. If you’re considering NSP for your portfolio, see our FREE research report to learn more.
Two Business Services Stocks to Watch:
Brady (BRC)
Market Cap: $3.69 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 Do We Like BRC?
- Solid 7.5% annual revenue growth over the last five years indicates its offering’s solve complex business issues
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 15.7% exceeded its revenue gains over the last five years
- BRC is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
Brady is trading at $78.24 per share, or 15.5x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.
HNI (HNI)
Market Cap: $1.90 billion
With roots dating back to 1944 and a significant acquisition of Kimball International in 2023, HNI (NYSE:HNI) manufactures and sells office furniture systems, seating, and storage solutions, as well as residential fireplaces and heating products.
Why Are We Positive On HNI?
- Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Improving returns on capital reflect management’s ability to monetize investments
At $41.52 per share, HNI trades at 10.6x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Strong Momentum 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-micro-cap company Tecnoglass (+1,754% 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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