Intrinsic value of Maximus - MMS

Previous Close

$70.09

  Intrinsic Value

$61.26

stock screener

  Rating & Target

hold

-13%

Previous close

$70.09

 
Intrinsic value

$61.26

 
Up/down potential

-13%

 
Rating

hold

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MMS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  2,451
  2,500
  2,558
  2,623
  2,697
  2,779
  2,869
  2,966
  3,072
  3,186
  3,308
  3,439
  3,579
  3,727
  3,885
  4,053
  4,230
  4,418
  4,617
  4,827
  5,049
  5,283
  5,530
  5,790
  6,064
  6,353
  6,657
  6,977
  7,313
  7,667
  8,040
Variable operating expenses, $m
 
  1,042
  1,065
  1,091
  1,121
  1,153
  1,189
  1,228
  1,271
  1,316
  1,365
  1,378
  1,433
  1,493
  1,556
  1,623
  1,694
  1,770
  1,849
  1,934
  2,022
  2,116
  2,215
  2,319
  2,429
  2,545
  2,666
  2,795
  2,929
  3,071
  3,220
Fixed operating expenses, $m
 
  1,173
  1,202
  1,232
  1,263
  1,294
  1,327
  1,360
  1,394
  1,429
  1,464
  1,501
  1,539
  1,577
  1,616
  1,657
  1,698
  1,741
  1,784
  1,829
  1,875
  1,921
  1,969
  2,019
  2,069
  2,121
  2,174
  2,228
  2,284
  2,341
  2,400
Total operating expenses, $m
  2,137
  2,215
  2,267
  2,323
  2,384
  2,447
  2,516
  2,588
  2,665
  2,745
  2,829
  2,879
  2,972
  3,070
  3,172
  3,280
  3,392
  3,511
  3,633
  3,763
  3,897
  4,037
  4,184
  4,338
  4,498
  4,666
  4,840
  5,023
  5,213
  5,412
  5,620
Operating income, $m
  314
  286
  291
  300
  314
  331
  353
  378
  407
  441
  478
  560
  607
  657
  712
  772
  838
  908
  983
  1,065
  1,152
  1,245
  1,345
  1,452
  1,566
  1,687
  1,816
  1,954
  2,100
  2,255
  2,420
EBITDA, $m
  382
  353
  358
  368
  383
  401
  423
  450
  480
  515
  554
  597
  645
  697
  754
  816
  882
  955
  1,032
  1,116
  1,206
  1,302
  1,404
  1,514
  1,630
  1,755
  1,887
  2,028
  2,178
  2,337
  2,505
Interest expense (income), $m
  0
  0
  0
  1
  1
  1
  2
  2
  3
  4
  4
  5
  6
  7
  8
  8
  9
  10
  12
  13
  14
  15
  17
  18
  20
  21
  23
  25
  27
  29
  31
Earnings before tax, $m
  314
  286
  291
  300
  313
  330
  351
  375
  404
  437
  474
  555
  601
  651
  705
  764
  828
  897
  972
  1,052
  1,138
  1,230
  1,329
  1,434
  1,546
  1,666
  1,793
  1,929
  2,073
  2,226
  2,389
Tax expense, $m
  102
  77
  78
  81
  84
  89
  95
  101
  109
  118
  128
  150
  162
  176
  190
  206
  224
  242
  262
  284
  307
  332
  359
  387
  417
  450
  484
  521
  560
  601
  645
Net income, $m
  209
  209
  212
  219
  228
  241
  256
  274
  295
  319
  346
  405
  439
  475
  515
  558
  604
  655
  709
  768
  831
  898
  970
  1,047
  1,129
  1,216
  1,309
  1,408
  1,513
  1,625
  1,744

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  166
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,351
  1,209
  1,237
  1,268
  1,304
  1,344
  1,387
  1,434
  1,485
  1,541
  1,600
  1,663
  1,730
  1,802
  1,879
  1,960
  2,046
  2,136
  2,233
  2,334
  2,441
  2,555
  2,674
  2,800
  2,932
  3,072
  3,219
  3,374
  3,536
  3,708
  3,888
Adjusted assets (=assets-cash), $m
  1,185
  1,209
  1,237
  1,268
  1,304
  1,344
  1,387
  1,434
  1,485
  1,541
  1,600
  1,663
  1,730
  1,802
  1,879
  1,960
  2,046
  2,136
  2,233
  2,334
  2,441
  2,555
  2,674
  2,800
  2,932
  3,072
  3,219
  3,374
  3,536
  3,708
  3,888
Revenue / Adjusted assets
  2.068
  2.068
  2.068
  2.069
  2.068
  2.068
  2.068
  2.068
  2.069
  2.067
  2.068
  2.068
  2.069
  2.068
  2.068
  2.068
  2.067
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
  2.068
Average production assets, $m
  249
  255
  261
  268
  275
  283
  293
  303
  313
  325
  337
  351
  365
  380
  396
  413
  431
  451
  471
  492
  515
  539
  564
  591
  619
  648
  679
  712
  746
  782
  820
Working capital, $m
  341
  178
  182
  186
  191
  197
  204
  211
  218
  226
  235
  244
  254
  265
  276
  288
  300
  314
  328
  343
  358
  375
  393
  411
  431
  451
  473
  495
  519
  544
  571
Total debt, $m
  1
  9
  19
  30
  43
  56
  71
  88
  105
  125
  145
  167
  190
  215
  242
  270
  300
  331
  365
  400
  437
  476
  518
  562
  608
  656
  707
  761
  817
  877
  939
Total liabilities, $m
  411
  419
  429
  440
  453
  466
  481
  498
  515
  535
  555
  577
  600
  625
  652
  680
  710
  741
  775
  810
  847
  886
  928
  972
  1,018
  1,066
  1,117
  1,171
  1,227
  1,287
  1,349
Total equity, $m
  940
  789
  808
  828
  852
  877
  906
  937
  970
  1,006
  1,045
  1,086
  1,130
  1,177
  1,227
  1,280
  1,336
  1,395
  1,458
  1,524
  1,594
  1,668
  1,746
  1,828
  1,915
  2,006
  2,102
  2,203
  2,309
  2,421
  2,539
Total liabilities and equity, $m
  1,351
  1,208
  1,237
  1,268
  1,305
  1,343
  1,387
  1,435
  1,485
  1,541
  1,600
  1,663
  1,730
  1,802
  1,879
  1,960
  2,046
  2,136
  2,233
  2,334
  2,441
  2,554
  2,674
  2,800
  2,933
  3,072
  3,219
  3,374
  3,536
  3,708
  3,888
Debt-to-equity ratio
  0.001
  0.010
  0.020
  0.040
  0.050
  0.060
  0.080
  0.090
  0.110
  0.120
  0.140
  0.150
  0.170
  0.180
  0.200
  0.210
  0.220
  0.240
  0.250
  0.260
  0.270
  0.290
  0.300
  0.310
  0.320
  0.330
  0.340
  0.350
  0.350
  0.360
  0.370
Adjusted equity ratio
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653
  0.653

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  209
  209
  212
  219
  228
  241
  256
  274
  295
  319
  346
  405
  439
  475
  515
  558
  604
  655
  709
  768
  831
  898
  970
  1,047
  1,129
  1,216
  1,309
  1,408
  1,513
  1,625
  1,744
Depreciation, amort., depletion, $m
  68
  67
  67
  68
  69
  70
  71
  72
  73
  74
  75
  37
  38
  40
  41
  43
  45
  47
  49
  51
  54
  56
  59
  62
  64
  67
  71
  74
  78
  81
  85
Funds from operations, $m
  369
  275
  280
  287
  297
  310
  327
  346
  368
  393
  421
  442
  477
  514
  556
  601
  649
  702
  758
  819
  884
  954
  1,029
  1,108
  1,193
  1,284
  1,380
  1,482
  1,591
  1,707
  1,830
Change in working capital, $m
  32
  3
  4
  5
  5
  6
  6
  7
  8
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  18
  18
  19
  20
  22
  23
  24
  25
  26
Cash from operations, $m
  337
  272
  275
  282
  292
  305
  320
  339
  361
  385
  413
  433
  467
  504
  545
  589
  637
  689
  744
  804
  869
  937
  1,011
  1,090
  1,174
  1,263
  1,358
  1,460
  1,567
  1,682
  1,803
Maintenance CAPEX, $m
  0
  -26
  -27
  -27
  -28
  -29
  -30
  -30
  -32
  -33
  -34
  -35
  -37
  -38
  -40
  -41
  -43
  -45
  -47
  -49
  -51
  -54
  -56
  -59
  -62
  -64
  -67
  -71
  -74
  -78
  -81
New CAPEX, $m
  -24
  -6
  -6
  -7
  -8
  -8
  -9
  -10
  -11
  -12
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -23
  -24
  -25
  -27
  -28
  -29
  -31
  -33
  -34
  -36
  -38
Cash from investing activities, $m
  -25
  -32
  -33
  -34
  -36
  -37
  -39
  -40
  -43
  -45
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -74
  -78
  -81
  -86
  -90
  -93
  -98
  -104
  -108
  -114
  -119
Free cash flow, $m
  312
  240
  243
  248
  257
  268
  282
  298
  318
  341
  366
  384
  416
  451
  489
  531
  576
  624
  677
  734
  795
  860
  930
  1,004
  1,084
  1,169
  1,260
  1,356
  1,459
  1,568
  1,684
Issuance/(repayment) of debt, $m
  -165
  8
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  56
  59
  63
Issuance/(repurchase) of shares, $m
  -28
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -203
  8
  10
  11
  12
  14
  15
  16
  18
  19
  21
  22
  23
  25
  27
  28
  30
  32
  33
  35
  37
  39
  41
  44
  46
  48
  51
  54
  56
  59
  63
Total cash flow (excl. dividends), $m
  112
  248
  253
  259
  269
  281
  297
  315
  336
  360
  387
  406
  439
  476
  515
  559
  605
  656
  711
  769
  832
  899
  971
  1,048
  1,130
  1,218
  1,311
  1,410
  1,515
  1,627
  1,746
Retained Cash Flow (-), $m
  -191
  -15
  -18
  -21
  -23
  -26
  -28
  -31
  -33
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -106
  -112
  -118
Prev. year cash balance distribution, $m
 
  166
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  399
  235
  239
  246
  256
  268
  284
  303
  324
  348
  365
  395
  429
  466
  506
  549
  597
  648
  703
  762
  825
  893
  966
  1,044
  1,127
  1,215
  1,309
  1,409
  1,515
  1,629
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  383
  215
  208
  202
  198
  195
  192
  189
  186
  183
  173
  169
  163
  156
  148
  140
  130
  119
  108
  97
  85
  74
  63
  53
  44
  35
  28
  22
  17
  12
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

MAXIMUS, Inc. provides business process services (BPS) to government health and human services agencies. The Company operates through three segments: U.S. Federal Services, Health Services and Human Services. The U.S. Federal Services segment provides BPS and program management for large government programs, independent health review and appeals services for both the United States Federal Government, and state-based programs and technology solutions for civilian federal programs. The Health Services segment provides a range of BPS, as well as related consulting services, for state, provincial and national government programs. The Human Services segment provides national, state and local human services agencies with a range of BPS and related consulting services for welfare-to-work, child support, higher education and K-12 special education programs.

FINANCIAL RATIOS  of  Maximus (MMS)

Valuation Ratios
P/E Ratio 21.8
Price to Sales 1.9
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow 13.5
Price to Free Cash Flow 14.6
Growth Rates
Sales Growth Rate 2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -47.8%
Cap. Spend. - 3 Yr. Gr. Rate -12.6%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0.1%
Total Debt to Equity 0.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 15.5%
Ret/ On Assets - 3 Yr. Avg. 14.5%
Return On Total Capital 22.5%
Ret/ On T. Cap. - 3 Yr. Avg. 22%
Return On Equity 24.7%
Return On Equity - 3 Yr. Avg. 26%
Asset Turnover 1.8
Profitability Ratios
Gross Margin 25%
Gross Margin - 3 Yr. Avg. 24.3%
EBITDA Margin 15.6%
EBITDA Margin - 3 Yr. Avg. 15.2%
Operating Margin 12.8%
Oper. Margin - 3 Yr. Avg. 12.4%
Pre-Tax Margin 12.8%
Pre-Tax Margin - 3 Yr. Avg. 12.4%
Net Profit Margin 8.5%
Net Profit Margin - 3 Yr. Avg. 7.8%
Effective Tax Rate 32.5%
Eff/ Tax Rate - 3 Yr. Avg. 36%
Payout Ratio 5.7%

MMS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MMS stock intrinsic value calculation we used $2451 million for the last fiscal year's total revenue generated by Maximus. The default revenue input number comes from 2017 income statement of Maximus. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MMS stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for MMS is calculated based on our internal credit rating of Maximus, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Maximus.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MMS stock the variable cost ratio is equal to 41.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1144 million in the base year in the intrinsic value calculation for MMS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Maximus.

Corporate tax rate of 27% is the nominal tax rate for Maximus. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MMS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MMS are equal to 10.2%.

Life of production assets of 9.6 years is the average useful life of capital assets used in Maximus operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MMS is equal to 7.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $940 million for Maximus - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 65.521 million for Maximus is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Maximus at the current share price and the inputted number of shares is $4.6 billion.

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COMPANY NEWS

▶ Gov-Con People on the Move: Maximus names new CEO   [Jan-18-18 05:20AM  American City Business Journals]
▶ New Strong Sell Stocks for December 15th   [Dec-15-17 08:29AM  Zacks]
▶ ETFs with exposure to MAXIMUS, Inc. : December 14, 2017   [Dec-14-17 01:50PM  Capital Cube]
▶ New Strong Sell Stocks for December 12th   [Dec-12-17 09:44AM  Zacks]
▶ New Strong Sell Stocks for December 7th   [Dec-07-17 09:01AM  Zacks]
▶ ETFs with exposure to MAXIMUS, Inc. : November 27, 2017   [Nov-27-17 02:47PM  Capital Cube]
▶ Is MAXIMUS Inc (MMS) As Strong As Its Balance Sheet Indicates?   [Nov-10-17 09:55AM  Simply Wall St.]
▶ MAXIMUS, Inc. to Host Earnings Call   [07:10AM  ACCESSWIRE]
▶ Maximus beats Street 4Q forecasts   [06:49AM  Associated Press]
▶ Maximus Trying To Close In On Key Technical Benchmark   [03:00AM  Investor's Business Daily]
Financial statements of MMS
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