Maximus (NYSE:MMS): A 32% Return Story

Investors in Maximus, Inc. (NYSE:MMS) have seen favorable returns of 32% over the past five years. This impressive performance can be attributed to several key factors that have driven the company's growth and profitability. Let's delve into the details to understand what makes Maximus an attractive investment and whether these factors are sustainable in the long term.

Disciplined Acquisition Strategy

One of the primary drivers of Maximus' success is its disciplined acquisition strategy. The company has been actively acquiring businesses that enhance its capabilities and expand its service offerings. These acquisitions have allowed Maximus to improve its technical capabilities, gain additional skill sets, and expand its client relationships. This strategy has not only boosted organic growth but also differentiated Maximus from its competitors by delivering defined, measurable outcomes.



Consistent Dividend Payments

Maximus has a strong record of consistent dividend payments, which has been a significant attraction for income-seeking investors. During fiscal 2023, 2022, and 2021, Maximus paid cash dividends of $68 million, $68.7 million, and $68.8 million, respectively. These steady payouts indicate the company's commitment to creating value for shareholders and underline its confidence in its business. The recent declaration of a quarterly cash dividend of $0.30 per share payable on February 28, 2025, further reinforces this commitment.

High Liquidity Position

Maximus' robust liquidity position is another key factor driving investor confidence. The company's current ratio at the end of fourth-quarter fiscal 2024 was pegged at 1.49, slightly higher than the industry’s 1.45. This strong liquidity position provides financial flexibility and reduces the risk of insolvency, making the company a safer investment. The company's cash and cash equivalents of $356.8 million further support its liquidity strength.

Strong Growth Prospects

The Zacks Consensus Estimate for MMS’ fiscal 2025 revenues is pegged at $5.4 billion, reflecting 1% year-over-year growth. The consensus estimate for fiscal 2026 revenues is pegged at $5.5 billion, indicating a 2.3% rise year over year. This consistent growth outlook has been a key factor in driving investor returns. The company's ability to deliver defined, measurable outcomes and its strong record of dividend payments have further boosted investor confidence.



Positive Earnings Surprise History

Maximus has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an earnings surprise of 10.6% on average. This consistent outperformance has boosted investor confidence and driven stock prices higher. The company's ability to manage its operations efficiently and deliver on its financial targets has been a key factor in its success.

Sustainability of Key Factors

The sustainability of these factors in the long term can be validated by the following data and facts:

- Acquisition Strategy: Maximus' acquisition strategy has been a key driver of its growth. For example, the company's recent divestiture of employment services businesses in Australia and South Korea improved the health and predictability of its Outside the U.S. Segment. This shows that Maximus is actively managing its portfolio to enhance long-term value.

- Dividend Payments: The consistent dividend payments indicate that Maximus is generating sufficient cash flows to support these payouts. For instance, the company declared a quarterly cash dividend of $0.30 per share payable on February 28, 2025, to shareholders of record on February 15, 2025. This consistent dividend policy is likely to continue as long as the company maintains its strong cash flow generation.

- Liquidity Position: Maximus' strong liquidity position is supported by its current ratio of 1.49, which is higher than the industry average. This provides a cushion against short-term financial shocks and ensures that the company can meet its obligations.

- Growth Prospects: The Zacks Consensus Estimate for fiscal 2025 and 2026 revenues indicates that Maximus is expected to continue growing. For example, the consensus estimate for fiscal 2025 earnings has moved up from $5.83 per share to $5.85 per share in the past 60 days, reflecting analysts’ confidence in the company.

- Earnings Surprise History: Maximus' consistent earnings surprises indicate that the company is managing its operations efficiently and delivering on its financial targets. This trend is likely to continue as long as the company maintains its operational efficiency and market position.

Conclusion

In conclusion, the key factors driving the 32% return for Maximus investors over the past five years are sustainable in the long term, supported by the company's disciplined acquisition strategy, consistent dividend payments, strong liquidity position, positive growth prospects, and impressive earnings surprise history. These factors position Maximus favorably compared to industry benchmarks and competitors, making it an attractive investment for income-seeking investors.