Shares of MAXIMUS, Inc. MMS have gained 23.4% over the past three months, outperforming the 12.6% rally of the industry it belongs to and 12.6% growth of the Zacks S&P 500 Composite index.
The company carries an impressive Growth Score of B. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth.
Factors Benefiting the Stock
With more than 40 years of experience, MAXIMUS has grown to be a leading operator of government health and human-services programs globally. The company’s business process management expertise and ability to deliver cost-effective, efficient and high-scale solutions position it as a lucrative partner to governments. MAXIMUS maintains solid relationships and strong reputation with governments. Long-term contracts provide it predictable recurring revenue streams.
Maximus, Inc. Revenue (TTM)
The company’s core programs have been deemed as essential service, and thus remain open in every part of the world where they operate during the coronavirus-induced uncertain period.
MAXIMUS has a portfolio target operating profit margin range of 10% to 15% with high cash conversion and access to a $400 million credit facility. The company’s financial flexibility enables it to pursue business investment and strategic acquisition opportunities. The February 2020 acquisition of Injurynet is expected to strengthen MAXIMUS’ position as a provider of health and human services in Australia. The 2019 acquisition of GT Hiring Solutions improved the reach and capabilities of the company‘s Canadian employment services.
Some Risks
MAXIMUS has a debt-laden balance sheet. Total debt at the end of second-quarter fiscal 2020 was $159 million, compared with $7 million at the end of the prior quarter. The total debt to total capital ratio of 0.12 is higher than the industry’s 0.39 and the previous quarter’s 0.05. An increase in debt to capitalization ratio indicates higher risk of insolvency in challenging times.
Further, the company’s cash and cash equivalent of $126 million at the end of second-quarter fiscal 2020 was well below this debt level, underscoring that it doesn’t have enough cash to meet this debt burden. The cash level, however, can meet the short-term debt of $9 million.
Zacks Rank & Key Picks
MAXIMUS currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks to consider in the broader Zacks Business Services sector are SPS Commerce SPSC, SailPoint Technologies SAIL and Elastic N.V. ESTC. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected earnings per share (three to five years) growth rate for DocuSign, SPS Commerce and SailPoint is at 46.76%, 15% and 15%, respectively.
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