Maximus Inc (MMS, Financial) has recently shown a daily gain of 4.98%, coupled with a 3-month gain of 4.2%. With an Earnings Per Share (EPS) of $2.8, investors may question whether the current stock valuation is justified. Is Maximus fairly valued in the market? This analysis dives into the valuation of Maximus (MMS) to provide investors with a clearer picture of its current market standing and future prospects.
Company Introduction
Maximus Inc operates across various countries, offering government health and human services programs. With a significant portion of its revenue derived from long-term contracts with governments, particularly in the U.S. Federal Services segment, Maximus is a key player in its industry. The stock price of Maximus currently stands at $82.77, closely aligned with its Fair Value (GF Value) of $87.84, suggesting a potential fair market valuation. This introduction sets the stage for a deeper analysis into Maximus's intrinsic value, blending financial metrics with essential company insights.
Summarize GF Value
The GF Value is a proprietary metric that assesses the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. According to this measure, Maximus (MMS, Financial) is fairly valued. The stock's current price is in line with the GF Value, indicating that its long-term return could mirror the company's business growth rate. Below is the GF Value chart for Maximus, which visualizes the stock's fair value compared to its current trading price.
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Financial Strength
Investing in companies with robust financial strength is crucial to mitigate the risk of capital loss. Maximus's cash-to-debt ratio of 0.02 places it lower than 96.08% of its peers in the Business Services industry. This metric, alongside the company's fair financial strength rating of 5 out of 10, suggests that investors should be cautious and consider the financial stability of Maximus before investing. The following chart displays the company's debt and cash over recent years.
Profitability and Growth
Maximus has demonstrated consistent profitability over the past decade, with a solid operating margin of 6.2%, ranking it above half of the companies in its industry. This strong profitability, combined with a revenue of $4.80 billion and Earnings Per Share (EPS) of $2.8, contributes to its high profitability rank of 9 out of 10. When it comes to growth, Maximus has an impressive average annual revenue growth rate of 18.8%, though its 3-year average EBITDA growth is less remarkable, ranking below the median for its industry.
ROIC vs WACC
The comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is a vital indicator of a company's profitability. Maximus's ROIC of 6.05 is slightly below its WACC of 6.9, suggesting that the company may not be generating sufficient returns on its investments. This comparison is crucial for investors assessing the company's value creation potential.
Conclusion
In conclusion, Maximus (MMS, Financial) appears to be fairly valued according to the GF Value. The company's financial condition is fair, and its profitability is strong. However, its growth and value creation potential, as indicated by the ROIC vs WACC comparison, may warrant a closer examination. For a more detailed financial overview of Maximus, interested investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
