While the S&P 500 is up 16.9% since May 2025, Maximus (currently trading at $83.08 per share) has lagged behind, posting a return of 8.2%. This might have investors contemplating their next move.
Is now the time to buy Maximus, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free for active Edge members.
Why Is Maximus Not Exciting?
We're sitting this one out for now. Here are three reasons why MMS doesn't excite us and a stock we'd rather own.
1. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Maximus’s revenue to rise by 3.2%, a slight deceleration versus its 10.1% annualized growth for the past five years. This projection is underwhelming and indicates its products and services will face some demand challenges.
2. Free Cash Flow Margin Dropping
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Maximus’s margin dropped by 11.3 percentage points over the last five years. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s becoming a more capital-intensive business. Maximus’s free cash flow margin for the trailing 12 months was negative 2.6%.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Maximus historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 12.3%, somewhat low compared to the best business services companies that consistently pump out 25%+.
Final Judgment
Maximus isn’t a terrible business, but it doesn’t pass our bar. With its shares underperforming the market lately, the stock trades at 11.2× forward P/E (or $83.08 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now. We’d recommend looking at one of our all-time favorite software stocks.
Stocks We Would Buy Instead of Maximus
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