3 Under-the-Radar Services Stocks to Buy

Booz Allen, Genpact and Towers all have some allure going forward

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3 Under-the-Radar Services Stocks to Buy

Towers Watson

towerswatson185 3 Under the Radar Services Stocks to BuyPlenty of businesses are freaking out about federal healthcare reform and generalized economic uncertainty. Not Towers Watson (TW). For this company, it has been something of a boon.

TW takes care of functions like corporate benefits, risk and finance services, and technology and administrative duties — normal management services and consulting stuff.

But the outsized opportunity looks to be in its Exchange Solutions segment, which operates private health insurance exchanges for employer-sponsored coverage for corporate employees and retirees.

It also doesn’t hurt the bull case that TW has a long history of exceeding analysts’ profit expectations. Indeed, the firm has topped Wall Street’s bottom-line estimates every quarter for more than two years.

That all adds up to a stock that has gained 40% year-to-date, beating the broader market by 24 percentage points. And yet Towers’ valuation, while not a screaming bargain, still looks reasonable given forecast earnings growth.

The forward P/E of 13.5 is higher than TW’s own five-year average of 12.5, but again, that multiple expansion seems warranted given a long-term growth rate of 10.5% — more than a full percentage point better than that of the S&P 500.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/05/3-under-the-radar-services-stocks-to-buy/.

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