Business services providers use their specialized expertise to help enterprises streamline operations and cut costs. Market leaders have certainly capitalized on outsourcing trends and digital transformation initiatives to boost sales, helping fuel a 17% gain for the industry over the past six months - 6.7 percentage points higher than the S&P 500.
Regardless of these results, investors must exercise caution as many companies in this space are sensitive to the ebbs and flows of the broader economy. On that note, here are two services stocks we think can generate sustainable market-beating returns and one we’re steering clear of.
One Business Services Stock to Sell:
GEO Group (GEO)
Market Cap: $3.03 billion
With a global footprint spanning three continents and approximately 81,000 beds across 100 facilities, GEO Group (NYSE:GEO) operates secure facilities, processing centers, and reentry services for government agencies in the United States, Australia, and South Africa.
Why Are We Cautious About GEO?
- 3.3% annual revenue growth over the last five years was slower than its business services peers
- Day-to-day expenses have swelled relative to revenue over the last five years as its adjusted operating margin fell by 4 percentage points
- Free cash flow margin shrank by 11.1 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
GEO Group is trading at $22.95 per share, or 1x forward price-to-sales. Read our free research report to see why you should think twice about including GEO in your portfolio.
Two Business Services Stocks to Buy:
TTM Technologies (TTMI)
Market Cap: $19.5 billion
As one of the world's largest printed circuit board manufacturers with facilities spanning North America and Asia, TTM Technologies (NASDAQ:TTMI) manufactures printed circuit boards (PCBs) and radio frequency (RF) components for aerospace, defense, automotive, and telecommunications industries.
Why Is TTMI a Good Business?
- Impressive 17.2% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Market share is on track to rise over the next 12 months as its 32.8% projected revenue growth implies demand will accelerate from its two-year trend
- Earnings growth has massively outpaced its peers over the last two years as its EPS has compounded at 35.5% annually
TTM Technologies’s stock price of $188.40 implies a valuation ratio of 42.7x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
EXL (EXLS)
Market Cap: $4.45 billion
Originally founded as an outsourcing company in 1999 before evolving into a technology-focused enterprise, EXL (NASDAQ:EXLS) provides data analytics and AI-powered digital operations solutions that help businesses transform their operations and make better decisions.
Why Is EXLS a Top Pick?
- Impressive 17.2% annual revenue growth over the last five years indicates it’s winning market share this cycle
- Share repurchases over the last five years enabled its annual earnings per share growth of 21.4% to outpace its revenue gains
- Free cash flow margin grew by 5.2 percentage points over the last five years, giving the company more chips to play with
At $29.31 per share, EXL trades at 12.6x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.
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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 Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.