E Under The Spotlight: Maximus, Inc.

Over the past five years, sales have compounded at a 9% annual rate with net income and EPS compounding at healthy 5% and 6% rates, respectively, thanks to demographic, economic, and legislative trends.

Strong Free Cash Flow

During fiscal 2020, the company generated approximately $204 million in free cash flow. Thanks to strong cash flows, the company sharply boosted its annual dividend from $.18 per share two years ago to $1.12 a share in 2020. Free cash flow is expected to increase substantially in fiscal 2021 to a range of $300 million to $350 million.

The company’s capital allocation strategy in 2021 is to manage the business conservatively with more than adequate liquidity while continuing to pay its dividend, repurchasing shares opportunistically, and resuming merger and acquisition activities.

Fiscal 2021 Outlook

Signed contract awards during 2020 totaled $2.7 billion. The sales pipeline at 9/30/20 was $33 billion comprised of about $2 billion in proposals pending, $1.5 billion in proposals in preparation, and $29.6 billion in opportunities tracking. Maximus expects revenues in fiscal 2021 to range between $3.2-$3.4 billion, representing 10% organic growth when adjusting for the Census contract which is winding down. In 2021, EPS are expected in the range of $3.45-$3.70. Long-term investors should contract with Maximus, a high-quality firm with healthy long-term growth and strong cash flows. Buy.

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