COVID-induced dependency on technology and initiatives to diversify technology services coupled with growing digitization have been boosting the prospects of the Zacks Technology Services industry. Growth opportunities from robust adoption of the multi-cloud model should offset challenges arising from cyber threats and expenditures related to hiring skillful talent and restructuring initiatives.

IQVIA Holdings Inc. (IQV) , Blucora, Inc. (BCOR) and Evoqua Water Technologies Corp. (AQUA) are some stocks, which are likely to gain from the abovementioned industry trends.

Industry Description

The Zacks Technology Services industry comprises companies that are engaged in manufacturing, developing and designing an array of software support, data processing, computing hardware and communications equipment. These include integrated powertrain technologies, advanced analytics, technology solutions and contract research services, semiconductor packaging and interconnect technologies, collaboration software, specialty printers, and data acquisition and analysis systems. The industry includes consumer as well as business-oriented products and services. It comprises companies with diversified end-markets and customer base. Some industry participants also provide advanced analytics, clinical research services, data storage technology and solutions, and technology-enabled financial solution.

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Industry's Current Valuation

On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing technology services stocks, the industry is currently trading at 28.16X compared with the S&P 500’s 15.12X and the sector’s 22.77X.

Over the past year, the industry has traded as high as 35.23X, as low as 13.47X and at the median of 20.20X as the charts below show.

EV-to-EBITDA

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3 Technology Services Stocks to Keep a Close Eye on

Blucora:This Zacks Rank #1 (Strong Buy) Texas-based company provides technology-enabled financial solutions to consumers, small business owners, tax professionals, financial advisors, and certified public accounting firms in the United States. You can see the complete list of today’s Zacks #1 Rank stocks here.

Blucora has been benefiting from continued solid NPS scores, higher client retention rates, improved marketing effectiveness and ARPU strength driven by its broad set of customer offerings. Operational efficiencies and reduction in expenses are aiding Blucora’s bottom line.

The Zacks Consensus Estimate for Blucora’s 2022 EPS has improved 19.8% in the past 90 days. BCOR stock has gained 16.5% over the past year.

Price & Consensus: BCOR

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Evoqua Water Technologies: This Pennsylvania-based Zacks Rank #2 (Buy) company provides water and wastewater treatment systems and technologies, and mobile and emergency water supply solutions and contract services for industrial, commercial, and municipal water treatment markets in the United States and internationally.

Evoqua’s top line has been benefitting from higher volume for products and services across end markets in all regions, coupled with favorable pricing. The company witnessed revenue growth in capital, service and aftermarket categories and across most end markets. However, the bottom line is likely to have been weighed down by increased operating expenses, increased labor and travel costs.

The Zacks Consensus Estimate for Evoqua’s 2022 EPS has improved 14.5% in the past 90 days. AQUA stock has gained 66.2% over the past year.

Price & Consensus: AQUA

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IQVIA Holdings: This Zacks Rank #3 (Hold) North Carolina-based company provides advanced analytics, technology solutions, and contract research services to the life sciences industry in the Americas, Europe, Africa, and the Asia-Pacific.

IQVIA Holdings has a strong healthcare-specific global IT infrastructure, analytics-driven clinical development capabilities, a robust real-world solutions ecosystem and a growing set of proprietary clinical and commercial applications that allow it to grow and retain relationships with healthcare stakeholders. With an increasing presence in emerging markets, IQVIA Holdings will likely benefit from growth opportunities in the life sciences industry. Consistent share buybacks boost investor confidence and positively impact earnings per share.

The Zacks Consensus Estimate for IQVIA Holdings’ 2022 EPS has improved 0.6% in the past 90 days. IQV stock has gained 17.1% over the past year.

Price & Consensus: IQV

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