Maximus, Inc.

MMS Details

Maximus, Inc. (NYSE: MMS) is a business process services (BPS) firm that focuses on the health and human service industries. Its operating segments are: 1) US Services Segment, which provides a variety of BPS to US state and local government programmes, including programme administration, appeals, and assessments, as well as related consultancy work 2) The US Federal Services Segment, which offers BPS solutions for a variety of US federal civilian activities, such as system and software development and maintenance. 3) Outside the US Segment, includes Health and disability assessments, programme administration for employment assistance, and other job seeker-related services to governments and commercial customers in countries other than the United States.

Latest News:

• Quarterly Dividend: On January 11, 2022, the company declared a quarterly dividend of USD 0.28 per common share, paid on February 28, 2022, to shareholders of record on February 15, 2022.

Q1FY22 Results:

• Double Digit Growth in Topline: The company reported a YoY growth of 21.71% in overall revenue to USD 1.15 billion in Q1FY22 (ended December 31, 2021) from USD 945.55 million in Q1FY21, driven by 43.58% growth in US Federal Services.
• Reduction in Profitability: In Q1FY22, MMS' net income dropped to USD 53.33 million from USD 64.08 million in Q1FY21.
• Cash and Debt Position: The company had USD 181.79 million in cash and cash equivalents as of December 31, 2021, and total debt of USD 1.59 billion.

Key Risk:

• Competition Risk: MMS is a player in the information technology industry, and it competes directly with larger companies that have more financial and operational resources. Smaller businesses with established reputations and political ties also pose challenges for the company in some areas. All of these factors can harm the MMS' business prospects.

Outlook:

FY22 Guidance (Source: Q4FY22, Earnings Presentation, February 03, 2022)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

MMS' stock price has fallen 18.60% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 72.04 to USD 96.05. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 91.75.

Considering the correction in the stock price, solid balance sheet, positive outlook, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 74.76, up 0.05% as of March 22, 2022, at 11:29 AM PDT.

Three-Year Technical Price Chart (as on March 22, 2022, at 11:29 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.