Should Value Investors Consider MAXIMUS (MMS) Stock?

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put MAXIMUS Inc. (NYSE:MMS) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, MAXIMUS has a trailing twelve months PE ratio of 19.34, as you can see in the chart below:



This level is pegged slightly below the market, as the PE for the S&P 500 stands at about 19.72. If we focus on the long-term PE trend, MAXIMUS’s current PE level puts it below its midpoint of 24.90 over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it could be a good entry point.


Further, the stock’s PE also compares favorably with the Zacks Business Services sector’s trailing twelve months PE ratio, which stands at 23.66. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.



We should also point out that MAXIMUS has a forward PE ratio (price relative to this year’s earnings) of 18.96, so it is fair to say that a slightly more value-oriented path may be ahead for MAXIMUS stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, MAXIMUS has a P/S ratio of about 1.60. This is much lower than the S&P 500 average, which comes in at 3.10 right now. Also, as we can see in the chart below, this stands below the highs for this stock in particular over the past few years.



Broad Value Outlook

In aggregate, MAXIMUS currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes MAXIMUS a solid choice for value investors.

What About the Stock Overall?

While MAXIMUS might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade and Momentum score of A, each. This gives MMS a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen three estimates go lower in the past sixty days compared to no upward revisions, while the full year estimate has seen five upward and no downward revisions in the same time period.

This has had a mixed impact on the consensus estimate, as the current quarter consensus estimate has dropped by 2.6% in the past two months, while the full year estimate has increased 2.3%. This indicates that though the company may face some short-term hurdles, its future prospects remain favorable. You can see the consensus estimate trend and recent price action for the stock in the chart below:

This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

MAXIMUS is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. While the stock has a Zacks Rank #3, its solid Zacks Industry Rank (Top 43% out of 265 Zacks industries) indicates that the broader factors are favorable for the company.

So, value investors might want to wait for estimates to turn around in this name first, but once that happens, this stock could be a compelling pick.

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