Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. But increasing competition from AI-driven upstarts has tempered enthusiasm, limiting the industry’s gains to 13.5% over the past six months. This return lagged the S&P 500’s 15.9% climb.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Taking that into account, here is one resilient services stock at the top of our wish list and two we’re passing on.

Two Business Services Stocks to Sell:

Wiley (WLY)

Market Cap: $2.19 billion

With roots dating back to 1807 when Charles Wiley opened a small printing shop in Manhattan, John Wiley & Sons (NYSE: WLY) is a global academic publisher that provides scientific journals, books, digital courseware, and knowledge solutions for researchers, students, and professionals.

Why Do We Pass on WLY?

1. Annual sales declines of 1.9% for the past five years show its products and services struggled to connect with the market during this cycle
2. 7.3 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
3. Underwhelming 10.8% return on capital reflects management’s difficulties in finding profitable growth opportunities

Wiley’s stock price of $41.19 implies a valuation ratio of 1.3x trailing 12-month price-to-sales. Check out our free in-depth research report to learn more about why WLY doesn’t pass our bar.

Pitney Bowes (PBI)

Market Cap: $1.96 billion

With a century-long history dating back to 1920 and processing over 15 billion pieces of mail annually, Pitney Bowes (NYSE: PBI) provides shipping, mailing technology, logistics, and financial services to businesses of all sizes.

Why Does PBI Fall Short?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 9.5% annually over the last five years
2. Forecasted revenue decline of 1.3% for the upcoming 12 months implies demand will fall even further
3. High net-debt-to-EBITDA ratio of 5× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Pitney Bowes is trading at $11.55 per share, or 8.9x forward P/E. If you’re considering PBI for your portfolio, see our FREE research report to learn more.

One Business Services Stock to Buy:

Copart (CPRT)

Market Cap: $46.8 billion

Starting as a single salvage yard in California in 1982, Copart (NASDAQ: CPRT) operates an online auction platform that connects sellers of damaged and salvage vehicles with buyers ranging from dismantlers and rebuilders to used car dealers and exporters.

Why Is CPRT a Good Business?

1. Annual revenue growth of 16.1% over the last five years was superb and indicates its market share increased during this cycle
2. Additional sales over the last five years increased its profitability as the 20% annual growth in its earnings per share outpaced its revenue
3. CPRT is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its improved cash conversion implies it’s becoming a less capital-intensive business

At $48.84 per share, Copart trades at 28.5x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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