Watch Out: Barbarians At The Gate For Maximus (MMS)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Maximus ( MMS) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Maximus as such a stock due to the following factors:

  • MMS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $23.3 million.
  • MMS has traded 125,009 shares today.
  • MMS traded in a range 280.3% of the normal price range with a price range of $3.50.
  • MMS traded above its daily resistance level (quality: 9 days, meaning that the stock is crossing a resistance level set by the last 9 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on MMS:

MAXIMUS, Inc. provides business process services to government health and human services agencies in the United States, Australia, Canada, the United Kingdom, and Saudi Arabia. The company operates through two segments, Health Services and Human Services. The stock currently has a dividend yield of 0.3%. MMS has a PE ratio of 28.4. Currently there are 6 analysts that rate Maximus a buy, no analysts rate it a sell, and 1 rates it a hold.

The average volume for Maximus has been 517,000 shares per day over the past 30 days. Maximus has a market cap of $4.2 billion and is part of the services sector and diversified services industry. The stock has a beta of 0.93 and a short float of 2.7% with 5.89 days to cover. Shares are up 16.7% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Maximus as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company shows low profit margins.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 21.9%. Since the same quarter one year prior, revenues rose by 14.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MAXIMUS INC has improved earnings per share by 28.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MAXIMUS INC increased its bottom line by earning $2.10 versus $1.68 in the prior year. This year, the market expects an improvement in earnings ($2.37 versus $2.10).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 23.6% when compared to the same quarter one year prior, going from $33.86 million to $41.86 million.
  • Net operating cash flow has increased to $56.59 million or 34.92% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -12.94%.
  • Powered by its strong earnings growth of 28.57% and other important driving factors, this stock has surged by 50.36% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.

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