Should You Buy It? Maximus to the Max

The company said that the accelerated share repurchase will not affect its previous $40 million buyback program. Management said it still plans to complete the program over time. Maximus ended the September quarter with $196.7 million of cash on the balance sheet and no debt. Additionally, the company returns cash to shareholders through its 10-cent quarterly dividend (1% yield).

Maximus also announced solid fiscal fourth-quarter results Nov. 14. The company earned 68 cents a share, which was 3 cents ahead of expectations. Revenue grew 17.5% year over year to $201.9 million.

Credit CEO Richard Montoni, who took office in April 2006, for Maximus' new strategy and growth outlook. His goal is to shift the company away from growing revenue at all costs toward more -- and smaller -- contracts (under $50 million) that usually carry higher margins.

Maximus is targeting $850 million to $880 million of revenue for next year, including 15% to 20% organic growth. Because of the visibility of its government contracts, Maximus estimates that 83% of expected 2008 revenue is already booked into the backlog.

Even if some spending is cut because of depressed local government budgets, about 70% of the company's sales come from federally mandated programs.

Maximus shares are up more than 27% year to date, but I continue to believe that it offers value at current levels. While failure to sell the entire business was a near-term disappointment to some investors, I believe that focus will shift toward the company's impressive top-line growth and improved profitability in its core outsourcing business.