AMN Healthcare: A Strong Buy - Analyst Blog

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A solid year-to-date return of 170.5%, robust third-quarter 2012 results and rising estimates aided AMN Healthcare Services Inc. ( AHS ) to attain a Zacks #1 Rank (Strong Buy) status on December 22, 2012. Shares of this healthcare staffing and clinical workforce management solutions provider are now hovering close to its 52-week high of $12.17 attained on December 26.

The Rank Drivers

AMN Healthcare Services has outperformed the Zacks Consensus Estimate in 5 out of the last 7 quarters, while it reported in-line results in the remaining 2. Looking at the earnings surprise trend over the last 7 quarters, AMN Healthcare has topped estimates by an average of 117%, thereby justifying the Zacks Rank.

The company reported impressive third-quarter results on November 1, wherein earnings of 12 cents per share beat the Zacks Consensus Estimate by a couple of cents or 20% and surged 140% from 5 cents earned in 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 segments (up 9%), partly mitigated by a sales decline at 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 Estimates Revisions

The Zacks Consensus Estimate for 2012 rose 5.1% to 41 cents per share on the back of upward revisions in all the 5 estimates in the last 60 days. The current estimate implies a year-over-year jump of 195.7%.

For 2013, 4 out of 5 estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 8.2% to 53 cents per share. The current estimate suggests a year-over-year increase of 29%.

Premium Valuation

AMN Healthcare Services currently trades at a forward P/E of 27.22x, reflecting a 43% premium to the peer group average of 19.04x. Also, on a price-to-book basis, the shares trade at 3.06x, a substantial premium to the peer group average of 2.19x. However, on a price-to-sales basis, the stock trades at 0.54x, at a discount to the peer group average of 0.69x. Given its strong fundamentals, the premium valuation is justified, and is well supported by long-term earnings growth projection of 14%.

Company Description

Founded in 1985 and headquartered in San Diego, California, 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 $505.6 million, and primarily competes with Cross Country Healthcare, Inc. ( CCRN ) and On Assignment Inc. ( ASGN ).

AMN HLTHCR SVCS (AHS): Free Stock Analysis Report

ON ASSIGNMENT (ASGN): Free Stock Analysis Report

CROSS COUNTRY (CCRN): Free Stock Analysis Report

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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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