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Here's Why You Should Retain HMS Holdings (HMSY) Stock

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HMS Holdings Corp. (HMSY - Free Report) is well poised for growth on the back of growing Payment Integrity Solutions and Total Population Management, and strong margins. However, intense competition in the U.S. medical cost containment industry remains a concern.

The stock carries a Zacks Rank #3 (Hold).

Price Performance

Shares of HMS Holdings have gained 34.2%, outperforming the industry’s growth of 6.4% in a year’s time. The stock also outpaced the S&P 500 Index’s rally of 1.9%.

What’s Favoring the Stock?

HMS Holdings continues to benefit from its promising and growing Payment Integrity Solutions. Payment Integrity (PI) has been benefiting from greater throughput in the implementation process, expedited customer approvals for new PI edits, applied technology to simplify processes, increased coder productivity and accelerated revenue generation.

Per management, PI is anticipated to be a significant contributor to the Analytical Services wing in 2019.

Apart from PI solutions, Total Population Management (TPM) comes under HMS Holdings’ unique suite of Analytical Services. The company has been gaining traction from TPM for a signioficant period of time that has been contributing significantly to the company’s top line.

Product-yield enhancements and process improvements are consistently bolstering HMS Holdings’ margins and profitability. The company has been diligently managing operating expenses and broadening the use of technology tools such as robotic process automation and machine learning.

On the basis of these initiatives, the company has been exhibiting strong margins in the last few years and the momentum is expected to continue in the near term.

What’s Deterring the Stock?

The company faces intense competition in the U.S. medical cost containment space, which is a dynamic industry as customers have a lot of alternatives available to them.

Which Way Are Estimates Headed?

For 2019, the Zacks Consensus Estimate for revenues is pegged at $649.4 million, indicating an improvement of 8.5% from the year-ago period. The same for earnings stands at $1.20 per share, suggesting growth of 15.4% from the year-ago reported figure.

Key Picks

Some better-ranked stocks from the broader medical space are Cardiovascular Systems, Inc. (CSII - Free Report) , Quidel Corporation (QDEL - Free Report) and Heamonetics Corporation (HAE - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardiovascular Systems has earnings growth rate for fiscal fourth quarter of 2019 of 33.3%.

Quidel Corporation has a long-term earnings growth rate of 25%.

Heamonetics has a long-term earnings growth rate 13.5%.

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