Here's a look at the headline numbers from HMS Holdings' fourth quarter that caused traders to flee:
- Revenue grew 5% to $163.4 million, well below the consensus estimate of $170.8 million.
- GAAP net income dropped 47% to $17.3 million, or $0.20 per share.
- Adjusted EPS was $0.27, which was below the $0.31 in EPS that Wall Street was expecting.
- Cash balance at quarter-end was $139 million. Debt was $240 million.
HMS also spent $159 million to acquire a company called Accent during the quarter. Accent is focused on payment accuracy and cost containment.
Shifting to guidance, here's what management expects to happen in 2020:
- Adjusted revenue is forecast to land between $705 million and $715 million, which is projected growth of about 15% at the midpoint. That's above the consensus estimate on Wall Street of $701.6 million.
- Adjusted net income is expected to land between $76 million and $80 million, growth of about 13% at the midpoint.
Traders appear to be squarely focused on the weak quarterly results and are knocking down the share price in response.
HMS has been a steady performer for investors for the last few years, and market watchers expect profits to grow about 15% annually over the next five years. With shares currently trading for about 19 times next year's earnings estimates, there's an argument to be made that HMS is a value stock that is worth a closer look right now.