What: Shares of HMS Holdings Corp (HMSY), a company that helps government agencies and private payers help control their medical costs, were up 19% on an otherwise ugly day for the markets after news broke that the company was awarded a new government contract.
So what: Investors cheered after the company filed a current report with the SEC that stated that it was notified by the New York State Office of Medicaid Inspector General that is was being awarded a new Medicaid Third Party Liability Match and Recovery Services contract. The release stated that the agency determined that HMS was found to be the best value among the companies competing for the award.
The new contract is expected to start on January 7th, 2016, and lasts for 5 years, but it does have the potential to be extended for up to two years beyond that.
Now what: HMS investors were probably relieved to hear the news today that the company won the New York contract. These investors were probably holding their collective breath after last month's news that the state of New Jersey would not be renewing its contract with the company.
Last month's announcement caused the stock to drop hard, but it should be noted that the company's board of directors did step in and authorize a $75 million share repurchase program to take advantage of the weakness in the share price. That authorization certainly represents a sizable amount of money for a company with a market cap under $1 billion, and if executed certainly could create a lot of value for shareholders.
Given the nature of HMS' business, it's likely that the stock will continue to move sharply in one direction or the other based on any news of contract wins or losses in the years ahead, so investors who are interested in the stock should be ready to accept volatility, both good and bad, in the years ahead.
