The U.S. and global economies are gradually returning to normalcy after nearly three moths of lockdowns that brought the global economy to a standstill. The situation improved from late last month as the United States, the Eurozone and several major emerging market economies started reopening systematically, restoring significantly disrupted economic activities due to the coronavirus. At this stage, companies that provide various business services are likely to benefit hugely.
The Sector Looks Promising
The business services sector comprises industries including consulting, staffing, financial tractions, outsourcing, advertising, waste removal, building maintenance, technology services and auction/valuation services. This sector benefited from higher demand for expertise to improve operational efficiency and reduce costs.
Meanwhile, all 50 states eased lockdown restrictions and opened up their economies in some form last month. As the economy reopens in a phased manner and businesses gain pace, the companies that offer business services will witness increased demand.
Rising demand for risk mitigation services was a major growth driver for the business services sector. In the past month, the overall sector rallied 14.1%. Notably, technology services, consulting services and auction/valuation services industries have done impressively.
Technology services industry’s growth has accelerated on an increasing number of remote workers in the wake of the coronavirus crisis-induced work-from-home wave. Further, increasing mobile workers, courtesy of the ongoing workspace trend of Bring Your Own Device, have been benefiting the space for quite some time.
In this era of digital transformation, enterprises are actively seeking a common ground between on-premise and cloud infrastructures that will enable them to provide flexible and easily adoptable hybrid solutions.
Moreover, the consulting services outlook remains bright as organizations are increasingly seeking consultation in a bid to protect employees, and stay close to customers and shareholders. Several large and mid-sized companies are shifting from conventional data solutions to technical and domain-specific expertise, data analytics solutions, financial consultancy and operational consultancy services. This should help business service providers' gain going forward.
Additionally, the business software industry is benefiting from robust demand for multi cloud-enabled software solutions, given the ongoing transition from legacy platforms to modern cloud-based infrastructure. The industry players are incorporating artificial intelligence and tools like machine learning in their applications to make the same more dynamic and result-oriented. Elevated demand for enterprise software, which is ramping up productivity and improving decision-making process, is a key catalyst.
Our Top Picks
We have narrowed down our search to five business services stocks that have strong growth potential and rallied more than 15% in the past month. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Veritone Inc. VERI provides artificial intelligence and computing solutions in the United States and the United Kingdom. It develops and operates aiWARE platform, an AI operating system that integrates and orchestrates a range of cognitive engines to reveal multivariate insights from structured and unstructured data.
The Zacks Rank #1 company has an expected earnings growth rate of 42.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 7.8% over the past 30 days. The stock has rallied 100.4% in the past month.
PFSweb Inc. PFSW provides omni-channel commerce solutions in the United States, Europe, Canada and India. It operates through two segments — LiveArea Professional Services and PFS Operations. The Zacks Rank #2 company has expected earnings growth of 80% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 12.5% over the past 30 days. The stock price has soared 67.6% in the past month.
DocuSign Inc. DOCU provides cloud based software in the United States. It offers services to mortgage, non-profit, government, real estate, insurance, technology and healthcare industries. The Zacks Rank #1 company has expected earnings growth of 71% for the current year (ending January 2021). The Zacks Consensus Estimate for current-year earnings has improved by 0.1% over the past 30 days. The stock price has jumped 28% in the past month.
Evoqua Water Technologies Corp. AQUA provides a range of water and wastewater treatment systems and technologies, and mobile and emergency water supply solutions. It operates in two segments: Integrated Solutions and Services, and Applied Product Technologies.
The Zacks Rank #2 company has expected earnings growth of 51.7% for the current year (ending September 2020). The Zacks Consensus Estimate for current-year earnings has improved by 22.2% over the past 30 days. The stock price has climbed 24.7% in the past month.
iClick Interactive Asia Group Ltd. ICLK provides an online marketing technology platform. It offers digital marketing, data analysis, display solutions, software development and other services. The Zacks Rank #1 company has expected earnings growth of over 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 102% over the past 30 days. The stock price has surged 18.2% in the past month.
Today's Best Stocks from Zacks
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