Intrinsic value of Maximus, Inc. - MMS

Previous Close

$70.42

  Intrinsic Value

$82.49

stock screener

  Rating & Target

hold

+17%

Previous close

$70.42

 
Intrinsic value

$82.49

 
Up/down potential

+17%

 
Rating

hold

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

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 4.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  6.70
  6.53
  6.38
  6.24
  6.12
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
  5.28
  5.26
  5.23
  5.21
  5.19
  5.17
  5.15
  5.14
  5.12
  5.11
  5.10
  5.09
  5.08
Revenue, $m
  2,552
  2,719
  2,892
  3,073
  3,261
  3,456
  3,661
  3,873
  4,095
  4,327
  4,569
  4,822
  5,086
  5,362
  5,651
  5,954
  6,270
  6,601
  6,948
  7,312
  7,692
  8,091
  8,509
  8,948
  9,407
  9,889
  10,394
  10,924
  11,480
  12,064
Variable operating expenses, $m
  1,786
  1,899
  2,017
  2,139
  2,267
  2,400
  2,539
  2,684
  2,834
  2,992
  3,105
  3,277
  3,457
  3,645
  3,841
  4,047
  4,262
  4,487
  4,723
  4,970
  5,228
  5,500
  5,784
  6,082
  6,394
  6,721
  7,065
  7,425
  7,803
  8,199
Fixed operating expenses, $m
  437
  447
  457
  467
  477
  488
  498
  509
  521
  532
  544
  556
  568
  580
  593
  606
  620
  633
  647
  661
  676
  691
  706
  722
  737
  754
  770
  787
  804
  822
Total operating expenses, $m
  2,223
  2,346
  2,474
  2,606
  2,744
  2,888
  3,037
  3,193
  3,355
  3,524
  3,649
  3,833
  4,025
  4,225
  4,434
  4,653
  4,882
  5,120
  5,370
  5,631
  5,904
  6,191
  6,490
  6,804
  7,131
  7,475
  7,835
  8,212
  8,607
  9,021
Operating income, $m
  329
  373
  419
  466
  516
  568
  623
  680
  740
  803
  920
  989
  1,061
  1,137
  1,217
  1,301
  1,389
  1,481
  1,579
  1,681
  1,788
  1,901
  2,020
  2,145
  2,276
  2,414
  2,559
  2,712
  2,873
  3,042
EBITDA, $m
  418
  464
  513
  563
  616
  671
  729
  789
  852
  918
  988
  1,061
  1,137
  1,217
  1,301
  1,390
  1,482
  1,580
  1,682
  1,790
  1,903
  2,022
  2,147
  2,278
  2,416
  2,561
  2,714
  2,875
  3,044
  3,222
Interest expense (income), $m
  0
  0
  1
  3
  4
  6
  7
  9
  11
  13
  15
  17
  19
  21
  23
  25
  28
  30
  33
  36
  39
  42
  45
  49
  52
  56
  60
  64
  68
  73
  78
Earnings before tax, $m
  329
  371
  416
  462
  510
  561
  614
  669
  728
  788
  903
  970
  1,040
  1,114
  1,192
  1,273
  1,358
  1,448
  1,543
  1,642
  1,746
  1,856
  1,971
  2,092
  2,220
  2,354
  2,495
  2,644
  2,800
  2,964
Tax expense, $m
  89
  100
  112
  125
  138
  151
  166
  181
  196
  213
  244
  262
  281
  301
  322
  344
  367
  391
  416
  443
  471
  501
  532
  565
  599
  636
  674
  714
  756
  800
Net income, $m
  240
  271
  304
  337
  373
  410
  448
  489
  531
  576
  659
  708
  760
  813
  870
  929
  992
  1,057
  1,126
  1,198
  1,275
  1,355
  1,439
  1,527
  1,621
  1,719
  1,822
  1,930
  2,044
  2,164

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
Total assets, $m
  1,462
  1,557
  1,657
  1,760
  1,868
  1,980
  2,097
  2,218
  2,346
  2,478
  2,617
  2,762
  2,913
  3,071
  3,237
  3,410
  3,591
  3,781
  3,980
  4,188
  4,406
  4,634
  4,874
  5,125
  5,388
  5,664
  5,953
  6,257
  6,575
  6,909
Adjusted assets (=assets-cash), $m
  1,462
  1,557
  1,657
  1,760
  1,868
  1,980
  2,097
  2,218
  2,346
  2,478
  2,617
  2,762
  2,913
  3,071
  3,237
  3,410
  3,591
  3,781
  3,980
  4,188
  4,406
  4,634
  4,874
  5,125
  5,388
  5,664
  5,953
  6,257
  6,575
  6,909
Revenue / Adjusted assets
  1.746
  1.746
  1.745
  1.746
  1.746
  1.745
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
  1.746
Average production assets, $m
  373
  397
  422
  449
  476
  505
  534
  566
  598
  632
  667
  704
  743
  783
  825
  869
  915
  964
  1,014
  1,068
  1,123
  1,181
  1,242
  1,306
  1,373
  1,444
  1,518
  1,595
  1,676
  1,761
Working capital, $m
  174
  185
  197
  209
  222
  235
  249
  263
  278
  294
  311
  328
  346
  365
  384
  405
  426
  449
  472
  497
  523
  550
  579
  608
  640
  672
  707
  743
  781
  820
Total debt, $m
  26
  52
  80
  108
  138
  169
  201
  235
  270
  307
  345
  385
  427
  470
  516
  564
  614
  666
  721
  778
  838
  902
  968
  1,037
  1,110
  1,186
  1,266
  1,349
  1,437
  1,529
Total liabilities, $m
  403
  430
  457
  486
  515
  546
  579
  612
  647
  684
  722
  762
  804
  848
  893
  941
  991
  1,044
  1,098
  1,156
  1,216
  1,279
  1,345
  1,414
  1,487
  1,563
  1,643
  1,727
  1,815
  1,907
Total equity, $m
  1,058
  1,127
  1,199
  1,274
  1,352
  1,433
  1,518
  1,606
  1,698
  1,794
  1,895
  1,999
  2,109
  2,224
  2,343
  2,469
  2,600
  2,737
  2,881
  3,032
  3,190
  3,355
  3,529
  3,710
  3,901
  4,101
  4,310
  4,530
  4,760
  5,002
Total liabilities and equity, $m
  1,461
  1,557
  1,656
  1,760
  1,867
  1,979
  2,097
  2,218
  2,345
  2,478
  2,617
  2,761
  2,913
  3,072
  3,236
  3,410
  3,591
  3,781
  3,979
  4,188
  4,406
  4,634
  4,874
  5,124
  5,388
  5,664
  5,953
  6,257
  6,575
  6,909
Debt-to-equity ratio
  0.020
  0.050
  0.070
  0.080
  0.100
  0.120
  0.130
  0.150
  0.160
  0.170
  0.180
  0.190
  0.200
  0.210
  0.220
  0.230
  0.240
  0.240
  0.250
  0.260
  0.260
  0.270
  0.270
  0.280
  0.280
  0.290
  0.290
  0.300
  0.300
  0.310
Adjusted equity ratio
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724
  0.724

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  240
  271
  304
  337
  373
  410
  448
  489
  531
  576
  659
  708
  760
  813
  870
  929
  992
  1,057
  1,126
  1,198
  1,275
  1,355
  1,439
  1,527
  1,621
  1,719
  1,822
  1,930
  2,044
  2,164
Depreciation, amort., depletion, $m
  89
  92
  94
  97
  100
  102
  106
  109
  112
  115
  68
  72
  76
  80
  84
  89
  93
  98
  104
  109
  115
  121
  127
  133
  140
  147
  155
  163
  171
  180
Funds from operations, $m
  329
  363
  398
  434
  472
  512
  554
  597
  643
  691
  727
  780
  835
  893
  954
  1,018
  1,085
  1,156
  1,230
  1,307
  1,389
  1,475
  1,566
  1,661
  1,761
  1,866
  1,976
  2,093
  2,215
  2,344
Change in working capital, $m
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  38
  40
Cash from operations, $m
  318
  351
  386
  422
  459
  499
  540
  583
  628
  675
  711
  763
  817
  874
  934
  997
  1,064
  1,133
  1,206
  1,283
  1,363
  1,448
  1,537
  1,631
  1,729
  1,833
  1,942
  2,057
  2,177
  2,304
Maintenance CAPEX, $m
  -36
  -38
  -41
  -43
  -46
  -49
  -51
  -55
  -58
  -61
  -64
  -68
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -104
  -109
  -115
  -121
  -127
  -133
  -140
  -147
  -155
  -163
  -171
New CAPEX, $m
  -23
  -24
  -25
  -26
  -27
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -51
  -53
  -56
  -58
  -61
  -64
  -67
  -70
  -74
  -77
  -81
  -85
Cash from investing activities, $m
  -59
  -62
  -66
  -69
  -73
  -78
  -81
  -86
  -90
  -95
  -99
  -105
  -111
  -116
  -122
  -128
  -135
  -141
  -149
  -157
  -165
  -173
  -182
  -191
  -200
  -210
  -221
  -232
  -244
  -256
Free cash flow, $m
  259
  289
  320
  352
  386
  422
  459
  497
  538
  580
  611
  658
  707
  758
  812
  869
  929
  991
  1,057
  1,126
  1,199
  1,275
  1,356
  1,440
  1,529
  1,623
  1,721
  1,824
  1,933
  2,048
Issuance/(repayment) of debt, $m
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  25
  26
  27
  29
  30
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  50
  52
  55
  57
  60
  63
  66
  69
  73
  76
  80
  84
  88
  92
Total cash flow (excl. dividends), $m
  285
  315
  347
  381
  416
  453
  491
  531
  573
  617
  649
  698
  749
  802
  858
  917
  979
  1,044
  1,112
  1,184
  1,259
  1,338
  1,422
  1,509
  1,602
  1,699
  1,801
  1,908
  2,021
  2,140
Retained Cash Flow (-), $m
  -67
  -69
  -72
  -75
  -78
  -81
  -85
  -88
  -92
  -96
  -100
  -105
  -110
  -115
  -120
  -125
  -131
  -137
  -144
  -151
  -158
  -165
  -173
  -182
  -191
  -200
  -210
  -220
  -231
  -242
Prev. year cash balance distribution, $m
  92
  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
  310
  246
  276
  306
  338
  371
  406
  443
  481
  521
  549
  593
  639
  687
  738
  792
  847
  906
  968
  1,033
  1,101
  1,173
  1,248
  1,328
  1,411
  1,499
  1,591
  1,688
  1,791
  1,898
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
  298
  225
  240
  252
  262
  269
  274
  277
  276
  273
  261
  253
  243
  231
  217
  201
  184
  167
  149
  131
  114
  97
  82
  68
  55
  44
  34
  26
  20
  14
Current shareholders' claim on cash, %
  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, Inc. (MMS)

Valuation Ratios
P/E Ratio 21.9
Price to Sales 1.9
Price to Book 4.9
Price to Tangible Book
Price to Cash Flow 13.6
Price to Free Cash Flow 14.7
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 $2392 million for the last fiscal year's total revenue generated by Maximus, Inc.. The default revenue input number comes from 0001 income statement of Maximus, Inc.. 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 6.7% 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, Inc., 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, Inc..
    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 70.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $428 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 5.4% for Maximus, Inc..

Corporate tax rate of 27% is the nominal tax rate for Maximus, Inc.. 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 14.6%.

Life of production assets of 9.8 years is the average useful life of capital assets used in Maximus, Inc. 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 6.8%. 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 - $1083.867 million for Maximus, Inc. - 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 63.854 million for Maximus, Inc. 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, Inc. at the current share price and the inputted number of shares is $4.5 billion.

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