Maximus, Inc.

MMS Details

Maximus, Inc. (NYSE: MMS) is a business process services (BPS) company that specialises in the health and human care sectors. Its business segments are 1) The US Services Segment provides a variety of BPS to US state and local government programmes, such as programme administration, appeals, evaluations, and related consulting services. 2) The US Federal Services Segment provides BPS solutions for a wide range of US federal civilian activities, including system and software development and maintenance. 3) Health and disability assessments, programme management for employment assistance, and other job seeker-related services to governments and commercial customers in countries other than the United States are included in the Outside the US Segment.

Latest News:

• Quarterly Dividend: On April 8, 2022, the company declared a quarterly dividend of USD 0.28 per common share, payable on May 31, 2022, to shareholders of record on May 13, 2022.

Q2FY22 Results:

• Double Digit Growth in Topline: The company reported a YoY growth of 22.73% in overall revenue to USD 1.18 billion in Q2FY22 (ended March 31, 2021) from USD 959.28 million in Q2FY21, driven by 73.65% growth in US Federal Services.
• Reduction in Profitability: In Q2FY22, MMS' net income dropped to USD 50.10 million from USD 80.61 million in Q2FY21.
• Cash and Debt Position: The company had USD 92.64 million in cash and cash equivalents as of March 31, 2022, and total debt of USD 1.45 billion.

Key Risk:

• Competition Risk: MMS competes directly with larger organisations with more significant financial and operational resources in the information technology business. Smaller businesses with established reputations and political ties pose challenges for the company. All of these factors have the potential to hurt MMS' bottom line.

Outlook:

FY22 Guidance (Source: Q2FY22, Earnings Presentation, May 05, 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 22.89% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 63.20 to USD 94.79. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 71.45.

Considering the correction in the stock price, positive outlook, associated risks, and current valuation. We recommend a "Hold" rating on the stock at the closing price of USD 64.62, up 0.37% as of May 16, 2022.

Three-Year Technical Price Chart (May 16, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

Note 2: All forecasted figures and industry information have been taken from REFINITIV.  

Note 3: The report publishing date is as per the Pacific Time Zone.