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Business services providers thrive by solving complex operational challenges for their clients, allowing them to focus on their secret sauce. But cutbacks in corporate spending and the threat of new AI products have kept sentiment in check, and over the past six months, the industry has tumbled by 1.1%. This drawdown was disheartening since the S&P 500 held steady.

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 services stock boasting a durable advantage and two we’re passing on.

Two Business Services Stocks to Sell:

Sinclair (SBGI)

Market Cap: $1.11 billion

With over 2,400 hours of local news produced weekly and 640 broadcast channels reaching millions of American homes, Sinclair (NASDAQ:SBGI) operates a network of 185 local television stations across 86 U.S. markets, producing news programming and distributing content from major networks.

Why Should You Sell SBGI?

1. Annual sales declines of 3.5% for the past five years show its products and services struggled to connect with the market during this cycle

2. Sales are projected to tank by 10.5% over the next 12 months as its demand continues evaporating

3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 5.8 percentage points

At $16.76 per share, Sinclair trades at 2.2x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including SBGI in your portfolio, it’s free.

Connection (CNXN)

Market Cap: $1.64 billion

Starting as a small computer products seller in 1982 and evolving into a Fortune 1000 company, Connection (NASDAQ:CNXN) is a technology solutions provider that helps businesses and government agencies design, purchase, implement, and manage their IT infrastructure and systems.

Why Do We Think CNXN Will Underperform?

1. Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.3% annually over the last two years

2. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

3. Low free cash flow margin of 3.2% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders

Connection’s stock price of $62.82 implies a valuation ratio of 17.5x forward price-to-earnings. To fully understand why you should be careful with CNXN, check out our full research report (it’s free).