Yahoo Finance Was MAXIMUS Inc’s (NYSE:MMS) Earnings Growth Better Than The Industry’s?
After reading MAXIMUS Inc’s (NYSE:MMS) latest earnings update (31 March 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether MMS has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. View out our latest analysis for MAXIMUS
Did MMS’s recent earnings growth beat the long-term trend and the industry?
MMS’s trailing twelve-month earnings (from 31 March 2018) of US$224.83m has jumped 11.22% compared to the previous year. However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 16.26%, indicating the rate at which MMS is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the whole industry is facing the same headwind.
Revenue growth in the past few years, has been positive, however, earnings growth has not been able to catch up, meaning MAXIMUS has been increasing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US it industry has been growing its average earnings by double-digit 15.56% in the past year, and 11.27% over the last five years. This suggests that whatever uplift the industry is deriving benefit from, MAXIMUS has not been able to reap as much as its average peer.
In terms of returns from investment, MAXIMUS has invested its equity funds well leading to a 21.36% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15.59% exceeds the US IT industry of 7.05%, indicating MAXIMUS has used its assets more efficiently. However, its return on capital (ROC), which also accounts for MAXIMUS’s debt level, has declined over the past 3 years from 34.81% to 27.38%.
What does this mean?
Though MAXIMUS’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as MAXIMUS gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research MAXIMUS to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MMS’s future growth? Take a look at our free research report of analyst consensus for MMS’s outlook.
Financial Health: Is MMS’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
