Maximus Inc. (MMS): A Hidden Gem With Earnings Catalysts and Undervalued Potential

Investors, take note: Maximus Inc. (MMS) is quietly building a case for one of the best value plays in the government services sector. With its Q3 2025 earnings call on August 7, 2025, and a laundry list of strategic wins, this stock isn't just undervalued—it's primed to deliver outsized returns. Let me break down why.

The Numbers: A Strong Foundation

Maximus reported Q2 2025 revenue of $1.36 billion, a 1% year-over-year increase, but the real story is in the adjusted diluted EPS of $2.01, a 28% jump from the prior year. The U.S. Federal Services segment—the engine of growth—saw revenue soar 10.9% to $778 million, fueled by contracts like the IRS EDOS and VA Medical Disability Exam (MDE) programs. These aren't just any contracts: they're mission-critical services for the federal government, and Maximus is nailing them.

Tech-Driven Efficiency: The Maximus Forward Edge

Jim, this isn't your grandfather's government contractor. Maximus is betting on artificial intelligence (AI) and automation to slash costs and boost margins—a move that's already paying off. For example:
- AI for the No Surprises Act: Streamlined arbitration processes, freeing up staff to focus on high-value tasks.
- VA MDE Contract: AI tools cut case-processing time, accelerating veterans' benefits.

The results? The Federal segment's operating margin jumped to 15.3%, up from 11.9% in 2024. This isn't just growth—it's profitable growth, and it's why Maximus raised its full-year guidance to $5.25–5.4 billion in revenue and $6.30–$6.60 in adjusted EPS.

The Pipeline: $41.2 Billion of Future Gold

Maximus isn't resting on its laurels. Its sales pipeline sits at a staggering $41.2 billion, with 55% targeting new business. Recent wins include:
- PASRR Services Expansion: Now operating in 15 states, up from 12, to help states meet federal nursing home requirements.
- D.C. TANF Program Contract: Administering job training and placement services for low-income residents.

These aren't small deals. The IRS EDOS contract alone is worth $87 million, and there's more where that came from. With the federal government's focus on healthcare and veteran programs, Maximus is in the sweet spot.

Valuation: A 10 P/E? This Is a Bargain

Here's the kicker: Maximus is trading at a P/E of just 10.41, down from 15.92 in late 2024. That's a 35% drop in valuation multiples, even as earnings surge. Meanwhile, the stock price has climbed to $71.92, but it's still dirt cheap relative to its peers. Take ICF (ICFI) at 15.1 or GEO Group (GEO) at 36.39—Maximus is a steal!

A P/E of 10 means investors are paying just $10 for every $1 of earnings. For a company growing its federal business and boosting margins, that's a screaming buy.

Risks? Sure—But Manageable

No stock is risk-free. Maximus faces headwinds like federal procurement delays (civilian agencies are slow) and a 9% revenue drop in its U.S. Services segment due to reduced Medicaid “unwinding” activity. But the company is addressing these:
- Divestitures in non-core markets (like UK employment services) have improved Outside the U.S. margins to 3.4%.
- Days Sales Outstanding (DSO) at 73 days is high, but Maximus expects this to normalize by year-end.

The net leverage ratio of 1.9x gives the company flexibility to weather minor bumps.

Investment Call: Buy Before Earnings—Hold for the Long Haul

This is a buy the dip opportunity. With the Q3 earnings call on August 7, 2025, investors should be watching for:
- Top-line growth: Can the U.S. Federal Services segment keep its 10%+ momentum?
- Margin expansion: Will AI-driven efficiencies push the full-year margin to 12.5%+?
- Pipeline wins: Any new contract announcements or pipeline upgrades?

Even if Q3 misses slightly, the long-term story is too strong to ignore. Historically, earnings releases have led to an average return of -1.16% since 2022, but the current catalysts—including the IRS EDOS and VA MDE contracts—suggest this earnings call could break the trend. The $0.30 quarterly dividend (yielding ~0.4%) is a nice kicker, but the real upside is in share price appreciation.

Final Verdict: A Winner in the Making

Maximus is a rare blend of value and growth, riding tailwinds in federal healthcare and veteran programs. With a P/E under 11 and a fortress-like sales pipeline, this stock has all the hallmarks of a multi-year outperformer. Don't let the modest stock price fool you—this is a buy now.

Action Item: Buy MMS before the August 7 earnings call and hold through the Q3 results. This is a stock that's primed to surprise to the upside.

Disclosure: This analysis is for informational purposes only. Always do your own research or consult a financial advisor before making investment decisions.