Government services provider Maximus (NYSE:MMS) reported Q1 CY2025 results exceeding the market’s revenue expectations , but sales were flat year on year at $1.36 billion. The company expects the full year’s revenue to be around $5.33 billion, close to analysts’ estimates. Its non-GAAP profit of $2.01 per share was 45.7% above analysts’ consensus estimates.

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Maximus (MMS) Q1 CY2025 Highlights:

Revenue: $1.36 billion vs analyst estimates of $1.29 billion (flat year on year, 5.2% beat) Adjusted EPS: $2.01 vs analyst estimates of $1.38 (45.7% beat) Adjusted EBITDA: $186.4 million vs analyst estimates of $139 million (13.7% margin, 34.1% beat) The company slightly lifted its revenue guidance for the full year to $5.33 billion at the midpoint from $5.28 billion Management raised its full-year Adjusted EPS guidance to $6.45 at the midpoint, a 6.6% increase Operating Margin: 11.2%, up from 9.5% in the same quarter last year Free Cash Flow Margin: 1.9%, down from 6.5% in the same quarter last year Market Capitalization: $3.80 billion

“We are proud of our teams across the business who are focused on mission-critical service delivery of important government programs,” said Bruce Caswell, President and Chief Executive Officer.

Company Overview

With nearly 50 years of experience translating public policy into operational programs that serve millions of citizens, Maximus (NYSE:MMS) provides operational services, clinical assessments, and technology solutions to government agencies in the U.S. and internationally.

Sales Growth

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $5.40 billion in revenue over the past 12 months, Maximus is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, Maximus’s 11.1% annualized revenue growth over the last five years was excellent. This shows it had high demand, a useful starting point for our analysis.Maximus Quarterly Revenue

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Maximus’s annualized revenue growth of 6.5% over the last two years is below its five-year trend, but we still think the results were respectable.Maximus Year-On-Year Revenue Growth

This quarter, Maximus’s $1.36 billion of revenue was flat year on year but beat Wall Street’s estimates by 5.2%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

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Operating Margin

Maximus was profitable over the last five years but held back by its large cost base. Its average operating margin of 8.3% was weak for a business services business.

Looking at the trend in its profitability, Maximus’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.Maximus Trailing 12-Month Operating Margin (GAAP)

In Q1, Maximus generated an operating profit margin of 11.2%, up 1.8 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Maximus’s EPS grew at an astounding 16.1% compounded annual growth rate over the last five years, higher than its 11.1% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t expand.Maximus Trailing 12-Month EPS (Non-GAAP)

We can take a deeper look into Maximus’s earnings quality to better understand the drivers of its performance. A five-year view shows that Maximus has repurchased its stock, shrinking its share count by 11%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.Maximus Diluted Shares Outstanding

In Q1, Maximus reported EPS at $2.01, up from $1.57 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Maximus’s full-year EPS of $6.82 to shrink by 5.7%.

Key Takeaways from Maximus’s Q1 Results

We were impressed by how significantly Maximus blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also excited it lifted its full-year revenue and EPS guidance. Zooming out, we think this was a solid print. The stock traded up 5.8% to $71.11 immediately following the results.

Indeed, Maximus had a rock-solid quarterly earnings result, but is this stock a good investment here? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.

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