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Here's Why You Should Invest in HMS Holdings (HMSY) Stock Now

Zacks Equity Research

HMS Holdings Corp. HMSY is well poised for growth on the back of growing Payment Integrity Solutions and Total Population Management, and strong margins.

The stock carries a Zacks Rank #2 (Buy).

Price Performance

Shares of HMS Holdings have gained 34.6%, outperforming the industry’s growth of 23.1% on a year-to-date basis. The stock also outpaced the S&P 500 Index’s rally of 15.1%.



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 significant period of time and 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.

An upbeat 2019 outlook also instills optimism in the stock. For 2019, the company now anticipates revenues between $650 million and $660 million (up from the previously guided range of $640-$650 million), suggesting year-over-year growth in the band of 8.6-10.3%.

Net income is expected in the band of $85-$90 million (up from the prior band of $64-$70 million), indicating an improvement in the range of 54.5-63.6% year over year. Adjusted EBITDA is expected in the range of $185-$190 million (up from the previously guided range of $170-$175 million), suggesting an improvement of 14-17%.

Which Way Are Estimates Headed?

For 2019, the Zacks Consensus Estimate for revenues is pegged at $643.7 million, indicating an improvement of 7.6% from the year-ago period. The same for earnings stands at $1.30 per share, suggesting growth of 25% from the year-ago reported figure.

Other Key Picks

Some other top-ranked stocks from the broader medical space are Allscripts Healthcare Solutions, Inc. MDRX, INC Research Holdings, Inc. SYNH and Heamonetics Corporation HAE, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Allscripts Healthcare has a long-term earnings growth rate of 10.3%.

INC Research Holdings has a long-term earnings growth rate of 10.5%.

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

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