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, and over the past six months, the industry has pulled back by 1.6%. This drawdown was disheartening since the S&P 500 stood firm.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. 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:

IBM (IBM)

Market Cap: $230.3 billion

With a corporate history spanning over a century and once known for its iconic mainframe computers, IBM (NYSE:IBM) provides hybrid cloud computing platforms, AI solutions, consulting services, and enterprise infrastructure to help businesses modernize their operations.

Why Should You Sell IBM?

1. Annual sales growth of 1.7% over the last five years lagged behind its business services peers as its large revenue base made it difficult to generate incremental demand

2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 1% annually

3. Underwhelming 11.4% return on capital reflects management’s difficulties in finding profitable growth opportunities

IBM’s stock price of $249.20 implies a valuation ratio of 23.3x forward price-to-earnings. To fully understand why you should be careful with IBM, check out our full research report (it’s free) .

Lumen (LUMN)

Market Cap: $4.94 billion

With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE:LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.

Why Do We Think LUMN Will Underperform?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 9.4% annually over the last five years

2. Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable

3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

At $4.86 per share, Lumen trades at 1.4x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including LUMN in your portfolio, it’s free .

One Business Services Stock to Buy:

Globalstar (GSAT)

Market Cap: $2.70 billion

Known for powering the emergency SOS feature in newer Apple iPhones, Globalstar (NASDAQ:GSAT) operates a network of low-earth orbit satellites that provide voice and data communications services in remote areas where traditional cellular networks don't reach.

Why Are We Bullish on GSAT?

1. Market share has increased this cycle as its 29.8% annual revenue growth over the last two years was exceptional

2. Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 52.5% outpaced its revenue gains

3. Robust free cash flow margin of 23.7% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety

Globalstar is trading at $21.30 per share, or 19.8x forward EV-to-EBITDA. Is now a good time to buy? Find out in our full research report, it’s free .

Stocks We Like Even More

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