MMSNYSEThe short version
Maximus, Inc.
Maximus administers the back office of mandatory U.S. government benefit programs — Medicare help lines, Medicaid eligibility, veterans' medical exams — under multi-year contracts. A federal-budget scare has halved the stock while earnings kept rising.
The stock peaked at $98.93 in January 2026 and fell 41% to $58.30 by mid-July, even as management raised guidance twice on the way down.
$58.30
Share price
$3.1B
Market cap
$5.4B
Revenue (FY2025)
15.5%
Forward FCF yield
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The statements
Revenue near $5.4B and earnings at records, even as the multiple halved
FY2020 → FY2025as reported · $
Revenue$5.4B+2%
Gross margin24.6%+1.0pp
Operating margin9.7%+0.5pp
Net income$319M+4%
EPS$5.51+10%
As reported, FY2020–FY2025; September fiscal year end.
- Revenue. The top line climbed from $4.6B in FY2022 to $5.4B in FY2025 — low-single-digit growth on multi-year government contracts, roughly 88% of it public-sector.
- Earnings. Diluted EPS more than doubled from $2.63 in FY2023 to $5.51 in FY2025 as the post-pandemic margin trough recovered; adjusted EBITDA margin reached 12.9%.
- Cash. Operating cash flow was $429M and free cash flow $366M in FY2025 on light capex near 1.2% of sales, though first-half FY2026 cash ran negative before a seasonal catch-up.
What the price implies
At $58.30 the price implies free cash flow shrinking forever; the recent record runs the other way
Reverse-DCF: implied value per share by long-run FCF path
Priced in (~-5%/yr)
$58
Flat FCF, normalized base
$76
Flat FCF
$90
FCF +2%/yr
$115
FCF +3%/yr
$133
Gordon-growth perpetuity on the ~$475M FY2026 free-cash-flow midpoint at a 10% discount rate.
- The affirmative case. Discounted at 10%, Maximus's $58.30 price implies free cash flow declining about 5% a year in perpetuity, yet its direct 2025 federal-efficiency hit was about $4 million (0.07% of revenue) and it raised earnings guidance twice while peers ICF and SAIC absorbed 25% and roughly 3% revenue declines, while free cash flow merely holding flat would support about $90 a share.
- The counter. SAIC attributes its own forward contraction mainly to recompete losses, and Maximus faces a concentrated veterans-exam recompete that opens to all vendors on December 31, 2026 — so the priced-in fade may be a rational markdown of terminal value, not fear.
What it is
The back office of mandatory U.S. benefit programs, about 88% government
FY2025 revenue by segment
U.S. Federal Services$3,068M56%
U.S. Services$1,764M32%
Outside the U.S.$600M11%
About 11% of revenue is earned outside the U.S.
- The franchise. Maximus runs Medicare and Marketplace help lines, Medicaid eligibility, welfare-to-work, student-loan servicing and clinical exams for veterans, under multi-year contracts.
- Concentration. About 88% of the $5.4B base is government, roughly 60% sits in the ten largest contracts, and one federal agency supplies close to a fifth.
- Backlog. Signed backlog was $15.3B at September 30, 2025 — about 2.8 times revenue — a visible but not guaranteed floor under the next few years.
The moat
A ~90% rebid win rate on mandatory programs, with concentration that cuts both ways
~90%
Rebid win rate, held five years
0.07%
Direct revenue hit from the 2025 efficiency drive
~60%
Revenue in the ten largest contracts
~20%
Revenue from a single federal agency
- Sticky by design. Management models a rebid win rate of "90%, plus or minus three," held for five years, on mandatory, bipartisan programs that persist across administrations.
- It barely bled. The federal efficiency drive that cut ICF's federal revenue 25% and pressured SAIC cost Maximus about $4M — 0.07% of revenue.
- The other edge. The 90% average hides single-award concentration: the veterans-exam contract that anchors both revenue and margin recompetes on December 31, 2026.
Cash conversion
Earnings turn to cash at more than 1.3 times over a cycle, but lumpily
Operating cash flow vs net income
Over FY2020–2025 operating cash flow ran about 1.5x net income; free cash flow was $366M in FY2025.
- Conversion. Across the cycle operating cash flow ran about 1.5 times net income and free cash flow about 1.3 times, on capital spending near 1.2% of sales.
- The catch. The cash is back-end-loaded — the December 2025 quarter was a $244M outflow, recovered only partly in March — so the year leans on a September collection catch-up.
- Quality. Deferred revenue is small (~$97M) and payables show no stretching (~26 days), so the reported cash is not being flattered by slow-paying suppliers.
Balance sheet
A leveraged, intangible-heavy balance sheet serviced by a high cash yield
Balance sheet at a glance (Mar 31, 2026)
| Item | Figure | Read |
|---|---|---|
| Net debt / EBITDA | ~1.8x | Inside a high-FCF buyer's tolerance, not net cash |
| Deferred revenue | ~$97M | Under a week of revenue; not a growth signal, not debt |
| Debt maturities | TLA '29, TLB '31 | First real refinancing three years out |
| Tangible book value | ~ -$650M | Goodwill exceeds equity; tangible P/B not usable |
| Ex-facility DSO | 102 vs 78 reported | A receivables facility flatters the headline |
- Leverage. Net debt near $1.38B is about 1.8 times EBITDA — not the net-cash balance sheet a conservative buyer prefers, but comfortably serviced by a 15% forward cash yield.
- Duration. The term loans mature in 2029 and 2031 alongside an undrawn $750M revolver; the first real refinancing point is three years out.
- Watch the receivables. Excluding a receivables-purchase facility, days sales outstanding were 102 rather than the reported 78 — the balance-sheet line most worth tracking.
Operating leverage
The record margins are almost entirely one federal segment
Operating margin by segment
FY2026 shown at the raised full-year guide and second-quarter actual.
- The engine. U.S. Federal Services operating margin climbed from about 10% in FY2021 to 17.6% in early FY2026 as automation decoupled labor cost from processing volume.
- Not broad-based. The other two segments stayed near 10% or below; the earnings growth on flat revenue is concentrated in federal work.
- The overlap. That federal work runs through the veterans-exam contract facing recompete, so the margin engine and the largest recompete risk are one asset.
The VES deal
The 2021 veterans-exam business became both the growth and the risk
Clinical / veterans-exam revenue
The current contract is open to all vendors through December 31, 2026.
- Bought for exams. Clinical exam revenue grew from about $539M in FY2020 to $2.1B in FY2025 — the core of the U.S. Federal Services expansion.
- Paid in intangibles. The purchase price was over 80% goodwill and intangibles ($864M goodwill, $580M customer relationships), leaving little tangible asset backing.
- The clock. Management calls the veterans-exam rebid "the largest" recompete it faces, and the VA had not published a timeline as of the May 2026 call.
Non-federal segments
The non-federal segments are shrinking as the company prunes overseas
Non-federal segment revenue
Four divestitures since 2023: U.K., Sweden, Italy/Singapore/Canada, Australia/Korea.
- Overseas retreat. Outside-the-U.S. revenue fell from about $764M in FY2022 to $600M in FY2025 as management exited the U.K., Sweden, Italy, Australia and Korea.
- Lower margin. Together the non-federal segments earn thin margins — international ran near 3.7% in FY2025 — against the 15%-plus federal book.
- The direction. Each divestiture makes the company more federal, concentrating both the growth and the budget exposure the report weighs.
Capital allocation
The share count is falling, but management bought well above today's price
Buyback tranches vs today's $58.30
| Tranche | Shares (M) | Avg price | vs $58.30 |
|---|---|---|---|
| FY2025 total | 5.8 | $78.79 | -26% |
| of which 4Q25 | 1.72 | $87.64 | -33% |
| 2Q26 (Jan-Mar) | 1.40 | $79.29 | -26% |
| Apr 2026 | 0.60 | $66.67 | -13% |
- Real reduction. Diluted shares fell from about 61.5M in FY2024 to 54.6M by the March 2026 quarter, with $447.5M repurchased in FY2025 alone.
- Bought above the market. Roughly $608M since October 2024 went in at a blended ~$78, the heaviest at $87.64 — a block worth about $150M less at $58.30.
- The tell to watch. The repurchase pace at ~$58 in the second half of FY2026 is the real test of whether management believes its own undervalued claim.
Valuation
On every cash metric the stock screens cheap; leverage is the one qualifier
15.5%
Forward free-cash-flow yield12.0% trailing
6.3x
EV / adjusted EBITDA
6.9x
Forward adjusted P/E
1.8x
Net debt / EBITDA
- Yield. Free cash flow of $366M on a ~$3.06B market cap is a 12% trailing yield; the FY2026 guide lifts it to about 15.5%, well above an 8% hurdle.
- Multiple. Enterprise value near $4.4B is 6.3 times trailing EBITDA and under six times the guide, far below the ~12 times line at which the multiple alone looks full.
- The qualifier. At about 1.8 times net debt to EBITDA this is not a net-cash balance sheet, though a high cash yield earns that tolerance.
Bull and bear
The bull and bear share the facts; dated, checkable events decide them
Same facts, two readings
| Shared fact | Bull read | Bear read |
|---|---|---|
| 41% drawdown to 6.9x fwd earnings | De-rating, not an earnings fall; guidance raised twice | Rational reprice of terminal value |
| 12% / 15.5% FCF yield | Cheap, cash-generative incumbent | Cash is facility-flattered and H2-loaded |
| ~90% rebid win rate | Durable retention moat | One concentrated 2026 veterans-exam recompete |
- The case for. A cheap, cash-generative incumbent in mandatory programs whose earnings and cash rose as the multiple halved, with revenue probably higher a decade out.
- The case against. Revenue and the record margin concentrate in one veterans-exam contract up for recompete, with reported cash leaning on a receivables facility.
- What settles it. Not sentiment but two dated events — the VA rebid outcome and whether the September collection catch-up arrives.
What to watch
The price already pays for erosion; the durability is real but concentrated in one contract.
- 01Veterans-exam recompete: the contract opens to all vendors on December 31, 2026; a loss hits both about a fifth of revenue and the record federal margin.
- 02FY2026 year-end cash: DSO staying above 70 days or free cash flow missing $450–500M turns the timing story into a trend.
- 03FY2027 federal margin: a fall back toward the old 10–12% target would mark 17.6% as a peak, not a level.
- 04H2 buyback pace: slowing repurchases at ~$58 would undercut the shares-undervalued claim.
This distills a guided study of Maximus built chapter by chapter — statements, moat, cash, and valuation.
Compiled from the full report · 2026-07-19 · For information, not investment advice.