AMN Healthcare Services - Aggressive Growth

AMN Healthcare Services Inc. ( AHS ) has amassed a year-to-date return of 167.2% and is now hovering close to its 52-week high of $11.66. Furthermore, earnings estimates have been on the rise since its solid third-quarter results last month, helping the stock attain Zacks #1 Rank (Strong Buy) status on December 13.

This provider of healthcare staffing and clinical workforce management solutions has outperformed the Zacks Consensus Estimate in 5 of the last 7 quarters, while matching in the remaining two. Looking at the earnings surprise trend over the last seven quarters, AMN Healthcare has topped estimates by an average of 117%.

Fabulous Q3, Upbeat Guidance

AMN Healthcare Services reported impressive third-quarter results on November 1, with earnings per share of 12 cents that beat the Zacks Consensus Estimate by 20%. It also surged 140% from the prior-year quarter. The quarter's earnings were aided by improving demand and constructive implementation of strategy in its core staffing and recruitment services and workforce solutions.

Consolidated revenue of $243.9 million surpassed the Zacks Consensus Estimate of $239 million, and rose 7% year over year. Sales increased in the Nurse and Allied Healthcare Staffing (up 13%) and Physician Permanent Placement Services (up 9%) segments, partly mitigated by a sales decline at the Locum Tenens Staffing segment (down 6%). Gross profit jumped 9% to $69.6 million, whereas gross margin expanded 70 basis points to 28.5%.

Management now expects fourth quarter consolidated revenue between $240 million and $244 million, reflecting year-over-year growth of 8% to 10%. Gross margin is projected between 28% and 28.5%.

Impressive Earnings Estimates Revisions

The Zacks Consensus Estimate for 2012 rose 7.7% to 42 cents per share in the last 60 days on upward revisions from 5 of 6 estimates. The current estimate implies a year-over-year jump of 196.4%.

For 2013, the Zacks Consensus Estimate has advanced 10.2% to 54 cents per share in the same time, as 4 of 6 estimates were revised higher. The current estimate suggests a year-over-year increase of 29.3%.

Premium Valuation

AMN Healthcare Services currently trades at a forward P/E of 27.11x, reflecting a 46.9% premium to the peer group average of 18.46x. Also, on a price-to-book basis, shares trade at 3.05x, a substantial premium to the peer group average of 2.08x. However, on price-to-sales basis, the stock trades at 0.54x, a discount to the peer group average of 0.70x. Given its strong fundamentals, the premium valuation is justified.

A Look at the Chart

The 12-month EPS chart below indicates that the stock price has now started correlating with the increasing trend in estimates. Currently, the stock price is in the range of $10.00-$12.00, and the consensus estimates for 2012 and 2013 are steadily moving upward. The year-to-date return for the stock is 167.2%, compared with the S&P 500's return of 10.7%.

AMN Healthcare Services offers healthcare recruitment and clinical staff management solutions in the U.S., and operates under three segments - Nurse and Allied Healthcare Staffing, Locum Tenens Staffing and Physician Permanent Placement Services. The company provides staffing solutions for hospitals and other healthcare institutions, provides physicians on a temporary and permanent basis, and offers a recruitment process outsourcing program. The company has a market cap of $499.3 million, and primarily competes with Cross Country Healthcare, Inc. ( CCRN ) and On Assignment Inc. ( ASGN ).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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