When I’m looking for a stock to name “Bull of the Day” I always look for a strong chart pattern I can point out. I find a strong pattern most effective when it’s in the direction of a long term trend and supported by a stock with great fundamentals. The Zacks Rank helps me uncover the analyst sentiment on a fundamental measure like earnings. A little extra secret sauce I try to splash in lies on the revenue side of the equation. Sure revenue growth is a great thing but I love looking for something I like to call “sticky revenue.”
These are revenues that come from things like subscriptions. These tend to grow at a more predictable pace and are less likely to leave you. Let’s face it, for the most part people are lazy. Cancelling a subscription service is usually a pain in the neck. Trust me, I’ve had a gym membership following me for months. I can’t even tell you what the inside of that gym looks like right now.
Another fantastically “sticky revenue” stream comes from the government. Local municipalities and state governments aren’t exactly known for their lightning fast changes. Companies that profit from government deals and contract work are among my favorite to find because of this. Today we’re looking at the government services industry that sits in the Top 6% of our Zacks Industry Rank. Today’s “Bull of the Day” is Zacks Rank #1 (Strong Buy) MAXIMUS (MMS – Snapshot Report).
For 40 years, MAXIMUS has partnered with state, federal and local governments to provide health and human services programs. They are the leading administrator of Medicaid and CHIP services in the US as well as the premier provider of workforce-centered services in the US, Australia, the UK and Saudi Arabia. They operate in three groups, Government Program Management, Consulting, and Systems. The insights of MAXIMUS Consulting, and the technological innovations advanced through Systems help government gain program efficiencies and pursue improvements that in turn benefit citizens.
Analysts are in love with the business model. Over the last 7 days, three analysts have increased their earnings estimates for the current year and four have done so for next year. The bullish attitude has increased consensus for the current year from $2.35 to $2.40. The more dramatic move is the increase for next year’s Zacks Consensus Estimate, gapping up from $2.82 to $3.00. Add that to the recent earnings surprises over the last three quarters and you understand why this is a Zacks Rank #1 (Strong Buy).
The chart right now looks like the stock may be presenting us with a great buying opportunity. In this market, finding a pullback to support is tough as the major indexes seem to breakout near fresh highs every few weeks. With MMS if you take the move off the lows in August 2014 to the highs of April 2015 and draw in your Fibonacci Retracement levels you can see the potential buying opportunity that sits right around the corner.
The 23.6% retracement could provide support down at $61.70, very close to the MMS’s current trading range. With the Commodity Channel Index extending down to oversold territory, a “Buy” signal could be looming just around the corner. More patient investors could wait to see if the retracement depens to the 38.2% level down at $57.16. But you risk missing the boat if there is a reversal ahead of that level.