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HMS Holdings Gains on PI & TPM Solutions, Competition Rife

Zacks Equity Research

On Mar 20, we issued an updated research report on HMS Holdings Corp. HMSY. The company has an encouraging earnings surprise history, having outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 24%. Notably, this trend of consecutive beats underlines its operating efficiency.

HMS Holdings is likely to benefit from solid prospects in its Payment Integrity (“PI”) and Total Population Management (“TPM”) solutions. The company is consistently boosting margins and profitability.

PI comes under HMS Holdings’ unique suite of Analytical Services. The company’s PI services ensure accurate and appropriate healthcare payments. These services are applicable to all customers HMS Holdings serves, including federal and state governments, commercial health plans and other at-risk or self-insured entities.

Notably, PI revenues grew more 32.5% in the fourth quarter of 2018 on a year-over-year basis (excluding Medicare RAC).

The company’s TPM services consist of population risk analytics, and consumer engagement and care management solutions, driven by internal product development and acquisitions of Essette and Eliza in 2016 and 2017, respectively. TPM has been a significant top-line contributor for HMS Holdings. TPM revenues grew 15.1% on a year-over-year basis in the fourth quarter.

For 2019, the company expects revenues between $640 million and $650 million. This depicts year-over-year growth of 8.4-10.2%.

On the flip side, the company faces a highly regulated environment in almost every state it operates. This apart, stiff competition in the U.S. healthcare insurance benefit cost containment industry is a concern.

Bottom Line

In a year’s time, shares of HMS Holdings have gained 96.6% compare with the industry's 9.4% growth. The current level also compares favorably with the S&P 500 index's decline of 4.4% over the same time frame.

HMS Holdings currently has a Zacks Rank #3 (Hold). The company has an impressive Growth Style Score of B. Our Growth Style Score highlights all the vital metrics of a company’s financials to obtain a clearer picture of the quality and sustainability of its growth. Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 offer the best investment opportunities.


Key Picks

A few better-ranked stocks from the MedTech space are DexCom, Inc. DXCM, Varian Medical Systems, Inc. VAR and Masimo Corp. MASI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DexCom delivered a positive earnings surprise in each of the trailing four quarters, the average being 132.3%.

Varian Medical has long-term earnings growth rate of 8%.

Masimo has long-term earnings growth rate of 15.6%.

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