Shareholder-Friendly Steps Aid MAXIMUS (MMS), High Debt Ails

We have recently updated a report on

MAXIMUS , Inc.


MMS

.

The company recently reported better-than-expected third-quarter fiscal 2021 results. Earnings per share in the third quarter (excluding 15 cents from non-recurring items) amounted to $1.66, which surpassed the Zacks Consensus Estimate by 48.2% and surged 59.6% year over year. Revenues of $1.2 billion beat the consensus mark by 13.3% and increased 38% year over year.

Notably, the stock has gained 7.1% in the past year compared with 0.2% rise of the

industry

it belongs to.

Zacks Investment Research

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MAXIMUS has been active on the acquisition front to expand its business processes, knowledge and client relationships, enhance technical capabilities as well as gain additional skill sets. Strategic acquisitions also complement the company’s long-term organic growth strategy. Recently, it completed the acquisition of privately-held Veterans Evaluation Services. As MAXIMUS continues to execute and position for the future, this buyout is a natural next step in achieving management’s long-term strategy.

The company has a solid track record of dividend payments. During fiscal 2020 and 2019, MAXIMUS paid out cash dividends of $70.2 million and $63.9 million, respectively. It paid out $11.7 million dividends to its shareholders during fiscal 2018, 2017 and 2016. Such moves reflect on the company’s commitment to boost shareholders’ value and underline its confidence in its business.

MAXIMUS’ total debt at the end of third-quarter fiscal 2021 was $1.7 billion, much higher than $268 million at the end of the prior quarter. Cash and cash equivalent balance of $96 million was way below this debt level, underscoring that the company doesn’t have enough cash to meet this debt burden. The company, however, can meet the short-term debt of $61 million.

MAXIMUS’s total debt to total capital ratio of 0.54, was significantly higher than the prior quarter’s figure of 0.16. An increase in debt-to-capitalization ratio indicates higher risk of insolvency in challenging times.

Zacks Rank and Stocks to Consider

MAXIMUS currently carries a Zacks Rank #3 (Hold). You can see


the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader

Zacks Business Services

sector are

ManpowerGroup Inc.

MAN

, Equifax

EFX


and

TransUnion

TRU


, each carrying a Zacks Rank #2 (Buy).

The long-term expected earnings per share (three to five years) growth rate for ManpowerGroup, Equifax and TransUnion is pegged at 23.1%, 14% and 22%, respectively.


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