Why MAXIMUS, Inc. Shares Marched Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our thesis.

What: Shares of MAXIMUS, (NYSE: MMS  ) jumped 18% Thursday after the worldwide government services provider turned in better-than-expected fiscal first-quarter 2014 earnings.

So what: Quarterly sales grew 42%, to $406.6 million, which translated to diluted earnings growth of 61%, to $0.50 per share (including earnings of $0.01 per share from discontinued operations). By contrast, analysts were only looking for earnings of $0.42 per share on sales of $392.86 million.

Better yet, MAXIMUS increased its full-year fiscal 2014 guidance, calling for revenue between $1.6 billion and $1.68 billion, with diluted earnings per share from continuing operations between $1.95 and $2.05. Analysts, on average, were modeling 2014 earnings of $1.86 per share on sales of $1.62 billion.

Now what: CEO Richard Montoni weighed in: "Our new full-year guidance assumes continued high federal appeals volumes and includes contributions from several of our health insurance exchange contracts where the increased scope is expected to provide an ongoing benefit in the second quarter."

As it stands, shares might not look cheap trading around 30 times last year's earnings and 22 times next year's estimates. But I think that's a well-deserved premium considering MAXIMUS' solid growth on both the top  and bottom lines. Considering management is also rewarding investors with a small 0.4% dividend and selective share repurchases, I think the stock could still prove a bargain for patient long-term investors.

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