Is Maximus, Inc. (NYSE:MMS) Potentially Undervalued?

By
Simply Wall St
Published
May 23, 2021
NYSE:MMS
Source: Shutterstock

Maximus, Inc. (NYSE:MMS), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Maximus’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Maximus

What is Maximus worth?

Great news for investors – Maximus is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $135.10, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Another thing to keep in mind is that Maximus’s share price may be quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of Maximus look like?

earnings-and-revenue-growth
NYSE:MMS Earnings and Revenue Growth May 24th 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Maximus, it is expected to deliver a relatively unexciting earnings growth of 9.9%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since MMS is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on MMS for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MMS. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

So while earnings quality is important, it's equally important to consider the risks facing Maximus at this point in time. At Simply Wall St, we found 1 warning sign for Maximus and we think they deserve your attention.

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