Shares of business process services provider MAXIMUS, Inc. MMS scaled a new 52-week high of $63.15 during yesterday’s trading session, before closing at $61.30. MAXIMUS’ share prices have been on an uptrend since October last year. Despite its strong price appreciation, this Zacks Rank #2 (Buy) stock still has the wherewithal to further drive its price upward. The stock is currently trading at a forward P/E of 26.1x and has long-term earnings growth expectation of 17.0%.
Growth Drivers
MAXIMUS is set to join the S&P MidCap 400 index, replacing premium analog semiconductor manufacturer Skyworks Solutions Inc. SWKS. Skyworks, in turn, is joining the S&P 500 index in order to replace specialty retailer PetSmart, Inc. PETM that is geared up to be acquired by a consortium led by private equity firm BC Partners, Inc.
MAXIMUS, the erstwhile S&P SmallCap 600 constituent, is a leading operator of government health and human services programs in the U.S., the U.K., Canada, Australia and Saudi Arabia. The company delivered a solid performance over the last year, with a healthy return of 30.2% compared with 9.5% by the S&P 500.
The news of joining the S&P MidCap 400 index was further resonated by the news of an accretive acquisition. On the same day when news of joining a new index was made public, MAXIMUS inked a definitive agreement to acquire Acentia – a technology and management solutions provider to civilian and health agencies in the U.S. With the strategic purchase, the company has augmented its U.S. federal services business through additional contract vehicles and access to federal government agencies.
The all-cash transaction, valued at approximately $300 million, is expected to be slightly accretive on a U.S. GAAP basis in fiscal 2015, excluding related transaction and restructuring costs. MAXIMUS expects approximately $110 million in revenue contribution from Acentia in the remainder of the current fiscal, ending Sep 30, 2015. All these offer a lucrative investment proposition for investors seeking to own a stock that promise a healthy return on investment and have probably catapulted the shares to a 52-week high.
Another player in the industry that is worth reckoning includes ICF International Inc. ICFI, which carries the same Zacks Rank as MAXIMUS.
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