HMS Holdings Corp. (HMSY - Free Report) is well poised for growth on the back of strong Payment Integrity Solutions and Total Population Management, as well as solid margins. However, intense competition remains a woe.
Shares of HMS Holdings have lost 24.5%, wider than the industry’s 6% decline on a year-to-date basis. The S&P 500 Index has declined 14.7% in the same time frame.
The company, with a market capitalization of $1.98 billion, offers cost-containment solutions in the United States. HMS Holdings also provides Coordination of Benefits services to the government and commercial healthcare payers. It anticipates earnings to improve 12% over the next five years. Moreover, it beat earnings estimates in the trailing four quarters, with the average being 14.1%.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Weighing on the Stock?
The U.S. healthcare insurance benefits the cost containment industry via offering cost containment services, both directly and indirectly (through subcontracting). Competition is therefore robust in this dynamic industry as customers have many alternatives available.
Therefore, stiff competition continues to be a concern for HMS Holdings.
What’s Favoring the Stock?
HMS Holdings continues to benefit from promising and growing Payment Integrity Solutions. Payment Integrity (PI) has been gaining 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 2020.
In addition to PI solutions, Total Population Management (TPM) comes under HMS Holdings’ unique suite of Analytical Services. Notably, TPM has been gaining traction for a while now, which in turn has been contributing significantly to the 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 ML.
With these initiatives, the company has been exhibiting strong margins for the past few years and the momentum is expected to continue in the near term.
Which Way are Estimates Headed?
For 2020, the Zacks Consensus Estimate for revenues is pegged at $709.1 million, indicating a rise of 13.2% from the prior year. The same for earnings stands at $1.23 per share, suggesting a decline of 6.8% from the previous year.
Stocks to Consider
Some better-ranked stocks from the broader medical space include Accuray Incorporated (ARAY - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and DexCom, Inc. (DXCM - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Accuray has an expected earnings growth rate for the next quarter of 200%.
West Pharmaceutical has an estimated earnings growth rate for the next quarter of 3.4%.
DexCom has a projected long-term earnings growth rate of 36.7%.
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