HMS Holdings Corp.

HMS Holdings Corp. (HMSY - Snapshot Report) is projecting another strong year of earnings in 2009, recently providing bullish guidance when the company reported its strong third-quarter results in late October. This Zacks #1 rank stock operates in a Zacks industry rank #10 out of 217, distinguished territory on both accounts.

Company Description

HMS Holdings Corp., through its subsidiaries, provides cost containment and payment accuracy services to government-sponsored health and human services programs in the United States. The company has a market cap of $718 million.

Third-Quarter Results

HMS reported impressive third-quarter results on Oct 31 that were ahead of analyst estimates. Revenue was up 30% from last year to $49 million. Income spiked higher, jumping to $6.1 million. This produced earnings of 23 cents per share, one penny ahead of estimates.

A Pristine Balance Sheet

During the quarterly report HMS also announced that it now had a $31.6 million cash balance, up $6.7 million from last quarter. The company also noted that it has yet to tap a $25 million line of credit that is available until 2011.

Estimates and Guidance

With a solid quarter in hand, HMS went ahead and raised its 2008 guidance, saying it now expects full-year revenue of $181 million, up from the previous $175 million.

The analyst community is bullish on the company as well, with the next-year estimate pegged at 99 cents per share, a 26% earnings growth projection.

Valuations

Based upon the current-year estimate, this is an expensive stock, carrying a forward P/E multiple of more than 30X, a steep premium to the overall market.

The Chart

Shares of HMS have been on a tear since late October, advancing fro less than $20 to a recent high above $31, an impressive short-term return of more than 50%. Moving forward, with valuations this high, this company will need to hit its earnings targets to fuel more share appreciation. Take a look below.

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