On Thursday, Raymond (NS:RYMD) James analyst upgraded shares of MAXIMUS, Inc. (NYSE: MMS) from Market Perform to Outperform, setting a price target of $90.00. Gesuale cited a compelling valuation for the upgrade, noting that the company's multiple has compressed from 10.5x to 9.3x since the recent election.
Currently trading at a P/E of 14.82x, InvestingPro analysis indicates the stock is undervalued, with a perfect Piotroski Score of 9 reflecting strong financial fundamentals. He highlighted that the stock is currently trading at a discount compared to its historical relationship with its peer group.
The analyst pointed out that MAXIMUS shares have declined by 12% year-to-date, underperforming relative to the group and market gains of 17% and 27%, respectively. According to Raymond James, this presents an attractive valuation opportunity. With a strong current ratio of 1.49 and 20 consecutive years of dividend payments, InvestingPro data shows MAXIMUS maintains solid financial health, earning a "GOOD" overall rating. He believes that MAXIMUS has cleared several major hurdles, including the CCO contract, the OUS divestiture, and the VA contract recompete.
The analyst emphasized that with these challenges now in the past, MAXIMUS is positioned with a battered stock price, fewer distractions, and a revenue mix that is more resilient than many may assume. With revenue growth of 8.19% in the last twelve months and moderate debt levels, the company shows promising fundamentals. Gesuale also identified multiple potential growth catalysts for the company, such as the upcoming Census 2030, the IRS EDOS, and TSA projects.
The upgrade reflects a positive outlook for MAXIMUS, as the company appears to be moving beyond previous operational obstacles. With the reduced stock price and potential for growth, Raymond James sees the current situation as an opportune moment for investors. The new price target of $90.00 represents a significant increase from the current trading levels, suggesting confidence in the company's future performance.
In other recent news, Maximus (NYSE:MMS) has seen a series of significant developments. The company reported a robust fiscal year 2024 performance, with an organic revenue increase of 8.8% and a record adjusted earnings per share (EPS) of $6.11. Free cash flow also saw a substantial rise, reaching over $400 million, almost double the previous year's figure.
Additionally, Maximus announced an increase in its stock repurchase program by $200 million, following the completion of the previous $200 million stock buyback authorization. The company also made a notable change in its auditing responsibilities, dismissing Ernst & Young LLP and appointing KPMG LLP for the fiscal year ending September 30, 2025.
However, the company's contract with the U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services for Contact Center Operations was cancelled recently. Despite these developments, Maximus is projecting fiscal 2025 revenue to be between $5.275 billion and $5.425 billion, with an adjusted EPS forecasted to be in the range of $5.70 to $6.00 per share. These recent developments are essential for investors to consider as Maximus navigates its future financial trajectory.
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