MAXIMUS INC (NYSE:MMS) Presents a Compelling Case for Value Investors

For investors looking for chances in the market, the disciplined method of value investing provides a proven structure. This method, made famous by Benjamin Graham and then Warren Buffett, centers on finding companies selling for less than their true worth. The aim is to discover good businesses that the market has incorrectly priced for now, giving an investor a "margin of safety." A useful method to use this idea is by filtering for stocks that show good fundamental condition and earnings but are priced low. One firm that recently appeared using this view is MAXIMUS INC (NYSE:MMS).

A Detailed View of the Fundamentals

A full fundamental analysis report for MAXIMUS gives a numerical summary across five important sections: Valuation, Profitability, Financial Health, Growth, and Dividend. For a value investor, the relationship between these sections is key. An inexpensive stock is only a worthwhile purchase if the company is in good financial shape and can produce earnings. MAXIMUS seems to manage these elements, receiving a total fundamental score of 6 out of 10, with notably strong scores in valuation and profitability.

Strong Valuation Measures

The central idea of value investing is buying an asset for less than its value. The MAXIMUS fundamental report notes a valuation score of 8 out of 10, showing the stock is priced well compared to its financial results and future outlook. Important measures that support this are:

• Price-to-Earnings (P/E) Ratio: At 14.65, MMS is priced lower than both the S&P 500 average (27.00) and its industry group in the IT Services sector (29.44). It is valued lower than about 78% of its industry.
• Forward P/E Ratio: An even stronger number of 11.50 implies the market has not completely accounted for expected earnings increase, putting MMS lower than 86% of its rivals.
• Enterprise Value to EBITDA & Price/Free Cash Flow: These other valuation measures also point to a "rather low" price compared to the industry, doing better than over 80% of similar companies.

This low price offers the possible margin of safety value investors want. If the company's fundamentals stay sound or get better, the stock price could rise as the market adjusts its view.

Good and Steady Profitability

A low price is not attractive if the company does not make money. Value investing needs the business to be operating with the ability to produce returns. MAXIMUS gets a 7 out of 10 for profitability, proving its operational effectiveness.

• The company has made money steadily with positive operating cash flow for the last five years.
• Important return measures are notable: a Return on Equity (ROE) of 19.06% and a Return on Invested Capital (ROIC) of 11.77% both put MMS in the best quarter of its industry.
• Operating Margins have shown good increase lately, getting to 9.73%, which is higher than nearly 70% of industry peers.

This steady profitability is necessary. It shows management's skill in using investor money and supplies the financial means for future increase or investor returns, supporting the company's true worth.

Satisfactory Financial Health and Increase

While the valuation and profitability scores are strong, the report mentions a financial health score of 5 and a growth score of 5. For a value investor, these are not warning signs but sections for seeing the full situation.

• Financial Health (Score: 5): The company's ability to pay debts is satisfactory, with an Altman-Z score of 3.57 showing no near-term bankruptcy danger. The Debt-to-Equity ratio of 0.77 indicates some use of debt financing, but it matches industry standards. Liquidity measures are satisfactory, meaning the company can pay its short-term bills.
• Growth (Score: 5): The past increase record is positive, with Earnings Per Share (EPS) rising almost 30% over the previous year and at an average yearly rate of 13.77% over recent years. For the future, analysts predict EPS increase to continue at a solid 16.31% each year, although sales increase is forecast to be more limited.

This description matches a standard value situation: a company with a tested profitable operation, priced low, with predictions for ongoing, but not high, earnings increase. The satisfactory health score suggests the balance sheet can maintain this path without too much risk.

A Subject for More Study

MAXIMUS INC shows an example of what value-focused filters try to find: a profitable, well-known business with positive increase forecasts, offered at a price that may not show its complete possibility. Its good valuation and profitability measures, along with satisfactory health and increase, make it a subject deserving of more careful examination for investors using a value structure.

This review of MAXIMUS came from a methodical search for "Decent Value" stocks. Investors wanting to look at other companies that fit similar standards of good valuation, profitability, health, and increase can find more possible choices by using the Decent Value Stocks screen.

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Disclaimer: This article is for information only and is not financial guidance, a suggestion to buy or sell any security, or a support of any investment plan. The information given is based on data thought to be correct but is not assured. Investors should do their own complete study and think about their personal money situation and risk comfort before making any investment choices.