1 Services Stock Worth Your Attention and 2 Facing Challenges
Business services providers use their specialized expertise to help enterprises streamline operations and cut costs. These firms have helped their customers unlock huge efficiencies, so it’s no surprise the industry has posted a 23.2% gain over the past six months, beating the S&P 500 by 8.8 percentage points.
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 is one services stock boasting a durable advantage and two we’re steering clear of.
Two Business Services Stocks to Sell:
Kyndryl (KD)
Market Cap: $2.59 billion
Born from IBM's managed infrastructure services business in a 2021 spinoff, Kyndryl (NYSE:KD) is the world's largest IT infrastructure services provider that designs, builds, and manages technology environments for enterprise customers.
Why Does KD Fall Short?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 5% annually over the last five years
- Sales are projected to tank by 1% over the next 12 months as its demand continues evaporating
- Negative returns on capital show management lost money while trying to expand the business
Kyndryl is trading at $11.78 per share, or 4.6x forward P/E. If you’re considering KD for your portfolio, see our FREE research report to learn more.
RUM Group (RUM)
Market Cap: $2.8 billion
Founded in 2013 as a champion for content creator rights and free expression, RUM Group (NASDAQ:RUM) is a video sharing platform that positions itself as a free speech alternative to mainstream platforms, offering creators more favorable revenue-sharing opportunities.
Why Are We Cautious About RUM?
- Historically negative EPS is a worrisome sign for conservative investors and obscures its long-term earnings potential
- Cash-burning history makes us doubt the long-term viability of its business model
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $7.04 per share, RUM Group trades at 56.9x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why RUM doesn’t pass our bar.
One Business Services Stock to Buy:
TD SYNNEX (SNX)
Market Cap: $21.34 billion
Serving as the crucial middleman in the technology supply chain, TD SYNNEX (NYSE:SNX) is a global technology distributor that connects thousands of IT manufacturers with resellers, helping businesses access hardware, software, and technology solutions.
Why Are We Bullish on SNX?
- Annual revenue growth of 15.2% over the past two years was outstanding, reflecting market share gains this cycle
- Unparalleled revenue scale of $75.67 billion gives it an edge in distribution
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 27.7% exceeded its revenue gains over the last two years
TD SYNNEX’s stock price of $265.50 implies a valuation ratio of 11.5x forward P/E. Is now the right time to buy? See for yourself in our comprehensive 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 (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.