MAXIMUS INC (NYSE:MMS) Passes the Quality Investing "Caviar Cruise" Filter

For investors aiming to assemble a portfolio of lasting, well-managed businesses, the ideas of quality investing offer a useful structure. This method concentrates on finding companies with durable competitive strengths, reliable earnings, skilled leadership, and the capacity to produce high returns on capital over many years. Instead of searching for the lowest prices, quality investors frequently accept a reasonable price for outstanding businesses they can own for a long time. One organized method to find these candidates is through a specific stock filter, like the "Caviar Cruise" method, which selects for measurable signs of quality, including solid revenue and profit increase, high returns on invested capital, good free cash flow conversion, and a reasonable amount of debt.

A recent filter using this strategy has identified MAXIMUS INC (NYSE:MMS), a company that provides business process services and technology solutions for government health, human service, and employment programs around the world. We will look at how MMS matches the main points of a quality investing filter and what that indicates about the company.

Match with Quality Investing Standards

The Caviar Cruise filter uses several strict financial checks to find companies with a record of operational quality and financial soundness. MAXIMUS shows notable performance across many important measures.

• Earnings and Capital Use: A central idea of quality investing is a company's skill in producing high returns on the capital it uses. The filter asks for a Return on Invested Capital (leaving out cash, goodwill, and intangibles) over 15%. MAXIMUS greatly surpasses this with a ROICexgc of 71.03%. This high number shows the company's main activities are very effective at turning invested capital into earnings, a clear signal of competitive strength and able management.
• Debt Handling: Quality companies fund their activities carefully. The filter uses a Debt-to-Free Cash Flow ratio below 5, showing how many years it would take to clear all debt using current cash flow. MAXIMUS has a ratio of 3.64, which fits well within the allowed limit. This indicates the company's debt is not excessive and does not create a major threat to its financial position or options.
• Cash Flow Soundness: Lasting earnings are those supported by actual cash. The filter searches for a 5-year average Profit Quality (Free Cash Flow/Net Income) above 75%. MAXIMUS reports a number of 131.5%, meaning it has produced much more free cash flow than its accounting net income over this time. This high-grade earnings record gives the company plenty of cash to put back into the business, reduce debt, or give capital to shareholders without difficulty.
• Earnings Increase: Steady growth in operating profit (EBIT) is a main sign of a successful business. The filter requires a 5-year Compound Annual Growth Rate (CAGR) for EBIT above 5%. MAXIMUS has achieved an EBIT growth CAGR of 14.64%, indicating a solid and reliable increase in its core earnings ability over time.

Basic Profile Summary

An examination of MAXIMUS's wider fundamental analysis report gives a more complete picture that supports the filter's results. The company receives an overall fundamental rating of 6 out of 10, with clear positives in earnings and price assessment.

Its earnings score of 7 is supported by a good Return on Equity of 19.06% and better operating margins. The price assessment score is a high 8, with the stock seeming inexpensive compared to both its industry group and the wider S&P 500 based on Price/Earnings, Price/Forward Earnings, and Enterprise Value/EBITDA measures. The dividend score is also good at 7, backed by a steady 10-year payment history and a maintainable payout ratio. The primary areas of average scoring are financial position (5) and growth (5), with some comments on debt levels compared to the industry and forecasts for slowing revenue growth soon.

Investment Points for the Quality Approach

For an investor using a quality model, MAXIMUS shows a notable profile. Its leading measures, high returns on capital, good cash flow production, and reasonable debt, are exactly the lasting features quality investors look for. These qualities point to a business with pricing ability, operational effectiveness, and a structure that can endure economic changes, which is especially important for a company serving necessary government needs.

The appealing price ratios might be viewed as a possible chance if the market is not fully valuing these quality traits. Yet, the quality investor must also think about the less measurable factors noted in the strategy, like the company's competitive position in government contracting, the skill of its leadership, and the long-term durability of its growth sources in public sector outsourcing.

Find Other Quality Possibilities

The Caviar Cruise filter is made to methodically find companies that display the financial signs of quality. MAXIMUS is one instance that met its checks. Investors wanting to see the present list of qualifying companies or adjust the filter settings can use the filter here.

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Disclaimer: This article is for information only and is not financial guidance, a suggestion, or an offer to buy or sell any security. Investing has risk, including the possible loss of the original amount invested. You should do your own complete research and think about talking with a qualified financial advisor before making any investment choices.