This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Government Cost-Cutter: Under the Radar

BOSTON ( TheStreet) -- Shares of HMS Holdings (HMSY - Get Report), a cost manager for government-sponsored health programs, have returned 18% since TheStreet.com's Nov. 11 recommendation. The stock continues to record 52-week highs.

HMS on Monday announced its acquisition of Verify Solutions, an Atlanta-based auditor of employer-sponsored health-care plans. The stock rallied 7% on the news, bringing the one-year gain to 65%.

Third-quarter net income increased 36% to $8.4 million, and earnings per share climbed 30% to 30 cents. Revenue grew 21% to $59 million. HMS Holdings' operating margin extended from 22% to 25%. Its cash balance more than doubled to $70 million, as total debt decreased 33% to $13 million. HMS Holdings posted a quick ratio of 4.3 and a debt-to-equity ratio of 0.1, demonstrating its fiscal prudence.

HMS Holdings has an appealing business model: identifying inefficiencies in the health-care system, namely in Medicaid and Medicare, and correcting them. This business, which entails reviewing expenditures and mining data to recover erroneous charges, is tedious, but profitable. A health-care system as convoluted and inefficient as that of the U.S. is rife with errors. Duplicate payments, transfers to and from deceased beneficiaries, and fraudulent behavior is commonplace.

Despite a market value of just $1.1 billion, HMS Holdings is a pioneer in this niche industry. As government budget deficits rise and coverage reform is enacted, officials will demand improved efficiency. Over the past three years, HMS Holdings has enlarged its revenue by 44% annually, on average, and boosted its net profit 65% a year. HMS Holdings has proven immune to broader economic trends. Its stock has a beta, a measure of stock-market correlation, of just 0.1.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
SYM TRADE IT LAST %CHG
HMSY $16.84 0.00%
AAPL $125.01 0.00%
FB $78.10 0.00%
GOOG $524.22 0.00%
TSLA $230.43 0.00%

Markets

DOW 17,841.98 -86.22 -0.48%
S&P 500 2,080.15 -9.31 -0.45%
NASDAQ 4,919.6440 -19.6830 -0.40%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs