Originally published on Best Stocks Category: best stocks to buy nowWhen you hear about a professional services company, you probably picture an accounting firm, legal practice, or consulting company. But the category goes well beyond that. Other professionals include architects, engineers, pharmacists, and even journalists, all sub-sectors within the broader services sector. Even though these companies are generally stable and profitable, there’s also room for growth. Although these businesses tend to be smaller than other sectors due to their ‘mom and pop’ nature, they make up almost half of the S&P 500. As such, they’re prime candidates for investment at any time – especially if you can find some undervalued stocks to watch. Clarivate CLV – $70.20- $51.61THE first on our list of undervalued professional services stocks is Clarivate. Clarivate is a licensing and discovery services company that owns and operates the IP & Science business of Thomson Reuters. Thomson Reuters is one of the world’s largest information services companies – with a market cap of $12.5 billion.CLV operates in a growing part of the services sector. The company’s revenue comes from licensing services, including research databases, indices, and trademarks. The company’s IP & Science business also distributes scientific, medical, and health care information. As a result, the company is well-positioned to benefit from the growing demand for data-driven, scientific, and healthcare decision-making. Quest Diagnostics DGX – $81.84- $64.58QUEST Diagnostics is one of the world’s largest medical testing companies. With a market cap of $15.1 billion, the company is best known for providing diagnostic information to hospitals and doctors’ offices. Quest is heavily dependent on the healthcare industry as a medical testing company. However, rising awareness of preventable conditions, aging populations, and an increase in government regulation are all tailwinds for the company. The company has a proven track record of growth. Over the past five years, its revenue has grown at an average annual rate of 6.6%. The company’s earnings have grown faster at an average annual rate of 7.9%. Quest is one of the cheapest stocks on this list. At just 16 times its earnings, the stock is trading at a significant discount to its growth rate. Assuming the trends continue, Quest could be an excellent long-term investment. Patterson Companies PDCO – $58.31- $41.13PATTERSON Companies is one of the largest providers of health and wellness ingredients. The company distributes vitamins, minerals, probiotics, amino acids, and other ingredients to supplement manufacturers, pharmaceutical companies, and health and wellness retailers. While Patterson’s business heavily depends on the health and wellness industry, the company is well-positioned to profit from the growth of the supplements market. The supplements market is expected to grow at an annual rate of 7.3% through 2022. In comparison, the global pharmaceutical industry is expected to grow at an annual rate of just 1.5%. In addition, the company has a strong track record of earnings growth. Over the past five years, its revenue has grown at an average annual rate of 6.7%. The company’s earnings have grown at an average annual rate of 14.1%. Patterson is trading at an attractive valuation. Its stock is priced at just 13 times its earnings. Assuming the company continues to grow, it could be an excellent long-term investment. McKesson MCK – $148.95- $129.22MCKESSON is a pharmaceutical distribution company. The company distributes pharmaceuticals, medical supplies, and healthcare information technology products to hospitals, clinics, and physicians. McKesson is one of the largest distributors in the world, with a $147 billion market cap. McKesson is heavily dependent on the healthcare industry as a pharmaceutical distribution company. Over the next decade, the global healthcare sector is expected to grow at an annual rate of 3.5%. McKesson’s revenue and earnings have grown at similar rates over the past five years. The company has grown its revenue at an average annual rate of 3.7%. Similarly, McKesson’s earnings have grown at an average annual rate of 3.6%. Not only is McKesson, a large company, but it’s also operated by some of the best managers in the industry. The company’s CEO has been in the top spot for over 30 years – and has been in the top 100 CEOs for the past two decades. McKesson’s management team owns more than $600 million in company stock – a sign of confidence in their business. McKesson is a great long-term investment. Its stock is trading at a reasonable 18 times its earnings. Conclusion Investors generally think of defense and aerospace companies in the services sector. However, the sector is much broader than that. The services sector is more than half of the companies on the S&P 500. One of the reasons that services companies are so popular is that they are less cyclical than other sectors. While the defense sector heavily depends on government spending, the services sector relies less on government funding. Not only that, but service companies also tend to have higher profit margins and lower debt levels than other sectors. As such, they are generally better long-term investments. Investors should keep an eye on the services sector and look for undervalued stocks to watch.