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 April 12, 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.

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 competes directly with larger organisations with more financial and operational capabilities in the information technology industry. In some ways, smaller enterprises with established reputations and political links provide obstacles for the company. All of these elements have the potential to impair 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 14.23% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 72.04 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 83.73.

Considering the correction in the stock price, solid balance sheet, positive outlook, associated risks, and current valuation. We recommend a "Hold" rating on the stock at the current price of USD 75.52, up 1.57% as of April 26, 2022, at 09:37 AM PDT.

Three-Year Technical Price Chart (as on April 26, 2022, at 09:37 AM PDT). 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.