Two Business Services Stocks That Are On The Move

 | Mar 24, 2021 05:40AM ET

h2 Where Do Businesses Go When They Need Something?

To answer the question of where do businesses go when they need something we say a business services company. Because we are expecting a vigorous economic reopening this spring we also expect to see the business services companies do well too. Estimates for GDP growth in 2021 continue to rise and now stand above 10% for the year which is quite a feat not to mention an opportunity for businesses servicing other businesses for their income.

h2 Raven Industries Is Ready To Rebound/h2

Shares of Raven Industries (NASDAQ:RAVN) fell more than 10% after releasing its Q4 results and presenting a possible entry point for new money. The company is a micro-cap with a multi-pronged approach to business services. The company operates in three segments that include Applied Technology, Engineered Films, and Aerostar giving it exposure to three very different segments of the market. The Applied Technology segment combines traditional farming techniques with advanced engineering and software to enhance farm production of all kinds; the Engineered Films segment manufactures specialty plastic films and sheeting for agriculture, industry, and construction; and Aerostar manufactures equipment and software for high-altitude use by governments and industries.

The company’s Q4 results were weaker than expected but mitigated, in our view, by three facts. The first is that Applied Technology revenue grew 6% YOY and is expected to continue growing. The second is that Aerostar revenue was impacted by the timing of government contracts, this revenue will be recouped. The third is that weakness in end-markets for the Engineered Films segments will dissipate with the reopening, it’s just a matter of time. Based on the company’s outlook and growing orders in both the Applied Technology and Engineered Films segments we expect to see revenue return to YOY growth as soon as the fiscal 1st quarter and accelerate into the end of the year. CEO Dan Rykhus said:

"Fiscal 2022 will be an exciting year for our company as we build out each of our strategic platforms for growth while leveraging the strength of our underlying businesses. Substantial order activity and improving market fundamentals provide confidence in our ability to drive strong year-over-year growth in Applied Technology and Engineered Films. As we execute on these opportunities, we will remain focused on aggressively investing to advance Raven Autonomy™, Raven Composites™ and Raven Thunderhead while making significant progress on our multi-year plan to drive a step-change in our long-term growth."