Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. Market leaders have certainly capitalized on outsourcing trends and digital transformation initiatives to boost sales, helping fuel a 25.4% gain for the industry over the past six months - 3.4 percentage points higher than the S&P 500.
Although these companies have produced results, only a handful will thrive over the long term as AI-driven upstarts are rapidly taking share from the incumbents. 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:
SS&C (SSNC)
Market Cap: $18.3 billion
Founded in 1986 as a bridge between technology and financial services, SS&C Technologies (NASDAQ:SSNC) provides software and software-enabled services that help financial firms and healthcare organizations automate complex business processes.
Why Does SSNC Fall Short?
- Adjusted operating margin was unchanged over the last five years, suggesting it failed to gain leverage on its fixed costs
- Free cash flow margin has shown no improvement over the last five years
- Low returns on capital reflect management’s struggle to allocate funds effectively
SS&C’s stock price of $78.01 implies a valuation ratio of 10.6x forward P/E. Check out our free in-depth research report to learn more about why SSNC doesn’t pass our bar.
Two Business Services Stocks to Buy:
Super Micro (SMCI)
Market Cap: $27.45 billion
Founded in Silicon Valley in 1993 and known for its modular "building block" approach to server design, Super Micro Computer (NASDAQ:SMCI) designs and manufactures high-performance, energy-efficient server and storage systems for data centers, cloud computing, AI, and edge computing applications.
Why Do We Love SMCI?
- Annual revenue growth of 61.4% over the past two years was outstanding, reflecting market share gains this cycle
- Enormous revenue base of $39.06 billion provides significant distribution advantages
- Earnings per share grew by 27.8% annually over the last two years, massively outpacing its peers
Super Micro is trading at $41.77 per share, or 9.9x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Magnite (MGNI)
Market Cap: $3.36 billion
Born from the 2020 merger of Rubicon Project and Telaria, Magnite (NASDAQ:MGNI) operates the world's largest independent sell-side advertising platform that automates the buying and selling of digital advertising inventory across all channels and formats.
Why Will MGNI Outperform?
- Market share has increased this cycle as its 18.4% annual revenue growth over the last five years was exceptional
- MGNI is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders
- Historical investments are beginning to pay off as its returns on capital are growing
At $23.58 per share, Magnite trades at 20.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.
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.