RESTON, Va. (TheStreet) -- Small-cap stock-market indices are rife with companies in poor financial shape with dim prospects.

That's especially true in business services and consulting, which requires highly skilled -- and paid -- employees who compete against formidable competitors such as IBM ( IBM) and Accenture ( ACN).

Weak companies like Zanett ( ZANE), The Hackett Group ( HCKT) and TMNG Global ( TMNG) are omnipresent, but small-cap investors have better options. One such company is Reston, Va.-based Maximus ( MMS), which provides operations program management and consulting services to government groups.

Maximus derives much of its revenue from operations management on Medicare and Medicaid programs, which would grow with the passage of health-care reform proposed by President Barack Obama. A bill is working its way through the U.S. House of Representatives.

Granted, many of the initiatives in the health-care legislation wouldn't be rolled out until 2013 or later, but in the ramp-up stage, Maximus' workflow would increase massively. Even without such a shot in the arm, the company's fundamentals alone suggest it's a sound investment.

Maximus' stock increased almost 70% over the past year, in line with the Russell 2000 Index of small-company stocks. This year, Maximus has risen 22%, double that of the index. Maximus was first featured as an Under the Radar pick on Dec. 31, before the company released year-end results that were better than analysts had expected.

There may be more gains ahead. Maximus' return on equity is more than 20%, and its price-to-earnings ratio is 16.2, less than the peer-group average of 22.2.

The company has no long-term debt, with a cash balance of $131 million, giving it a lot of flexibility. Maximus could take on a modest amount of debt to fuel growth without increasing risk. A current ratio of nearly 2.2 illustrates the company's financial flexibility. Above 1 is considered strong.

A dividend yield of about 0.8% and a share-buyback program provided investors with some cash. Maximus' healthy financial situation should make expansion in the face of new regulations easy.

For Maximus to fully realize the benefits from the expansion of Medicare and Medicaid, investors will need to hold the stock for quite some time. As can be seen by its 2010 performance, however, this company is primed to cash in on the aging population.

-- Reported by David MacDougall in Boston.

Prior to joining TheStreet Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.

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