AMN Healthcare Services (NYSE: AMN)
QVI Research Report | Updated Coverage | June 2023
Summary
Although the pandemic proved a silver lining for AMN’s recent growth, its high-quality professional medical workforce solutions should prevail in the aging baby boomer, healthcare-dominated 21st century.
Shareholder yields, fundamentals, valuation multiples, and downside risks suggest AMN is a value-priced stock of a high-quality operator.
Nonetheless, short sellers are betting the COVID-19 growth is history and the stock will retreat.
In this updated research report, QVI answers why this Expanded Portfolio holding should continue to profit from the healthcare economy.
When referencing this report, premium (paying) subscribers can access their Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets. Unless noted, all data presented is sourced from Seeking Alpha Premium as of the market close on June 16, 2023, and intended for illustration only. If reading this in your email, consider viewing in the Substack App for a more inclusive experience.
AMN Healthcare Services Value Proposition
QVI Research Report’s value proposition section provides a brief synopsis of the company’s business model, major-exchange listing, stock symbol, market capitalization, and dividend-paying status. In addition, it defines the competitive advantages of a company’s products or services to its customers compared to the industry, including the stock’s historical performance vs. the sector and market.
AMN Healthcare Services, Inc. (NYSE: AMN) is a non-dividend-paying small-cap stock in the health care sector’s providers and services industry. AMN was added to the QVI Expanded Portfolio on March 22, 2022, at $105.54 a share.
AMN Healthcare Services, Inc. provides healthcare workforce solutions and staffing services to hospitals and healthcare facilities in the United States. It operates through three segments: Nurse and Allied Solutions, Physician and Leadership Solutions, and Technology and Workforce Solutions.
The Nurse and Allied Solutions segment offers travel nurse staffing, rapid response nurse staffing and labor disruption, allied staffing, local staffing, and revenue cycle solutions.
The Physician and Leadership Solutions segment provides locum tenens (meaning: to substitute for) staffing, healthcare interim leadership staffing, executive search, and physician permanent placement solutions.
The Technology and Workforce Solutions segment offers language services, vendor management systems, workforce optimization, telehealth, credentialing, and outsourced solutions.
The company also provides allied health professionals, such as physical therapists, respiratory therapists, occupational therapists, medical and radiology technologists, lab technicians, speech pathologists, rehabilitation assistants, and pharmacists. It offers its services under the brands American Mobile, Nursefinders, NurseChoice, HealthSource Global Staffing, Onward Healthcare, O’Grady Peyton International, Connetics, Med Travelers, Club Staffing, Staff Care, B.E. Smith, and Merritt Hawkins, as well as AMN Revenue Cycle Solutions and AMN Language Services.
AMN Healthcare Services, Inc. was founded in 1985 and is headquartered in Dallas, Texas, USA.
QVI’s value proposition elevator pitch for AMN Healthcare Services:
Although the coronavirus pandemic proved a silver lining for AMN’s recent growth, its high-quality professional medical workforce solutions should prevail in the aging baby boomer, healthcare-dominated 21st century.
Performance vs. Sector and Market
The chart below illustrates AMN’s performance against the Health Care Select Sector SPDR® Fund ETF (NYSE: XLV) and the SPDR® S&P 500 ETF Trust (NYSE: SPY) during the trailing three years, including QVI’s initial coverage of AMN Healthcare Services in March 2022.
For example, AMN outperformed its sector and the broader market in total return during the coverage period, reflecting the elevated demand for healthcare professionals during the COVID-19 pandemic.
Due Diligence Resources
For a more in-depth analysis of the all-important value proposition, visit AMN Healthcare Services’ investor relations webpage and its most recent Form 10-K Annual Report submitted to the U.S. Securities and Exchange Commission or SEC.
QVI’s value proposition rating for AMN Healthcare Services: Bullish.
AMN Total Return vs. XLV and SPY
AMN Healthcare Services Inc (AMN) Total Return: +139.60%
Health Care Select Sector SPDR ETF (XLV) TR: +38.77%
SPDR S&P 500 ETF Trust (SPY) Total Return: +48.15%
Three-Year Trailing (as of June 16, 2023)AMN Shareholder Yields
QVI Research Report’s shareholder yields section uncovers the equity bond rate of the company’s common shares. It aims to quantify the yields on earnings, free cash flow, and dividends to measure how the targeted stock compares to the prevailing yield on the 10-Year Treasury benchmark note.
Earnings and Free Cash Flow Yields
AMN’s earnings yield traded above the QVI targeted floor at 8.11%, as demonstrated in the below chart. In addition, at 8.77%, AMN’s free cash flow yield also exceeded the threshold.
As inverse valuation multiples, the weighted earnings and free cash flow yields suggest that AMN trades at a discount. QVI will further explore valuation multiples later in this report.
Dividend Yield
AMN Healthcare Services does not pay a dividend.
Average of Shareholder Yields
Quality Value Investing takes the average of the three shareholder yields to measure how the stock compares to the prevailing yield of 3.77% on the 10-Year Treasury benchmark note. For example, the average shareholder yield for AMN was 5.63% or +186 basis points [bps] above the 10-Year Treasury rate.
QVI’s shareholder yields rating for AMN: Bullish.
AMN Shareholder Yields
AMN Healthcare Services Inc (AMN) Price: $108.10
AMN Healthcare Services Inc (AMN) Earnings Yield: 8.11%
AMN Healthcare Services Inc (AMN) Free Cash Flow Yield: 8.77%
AMN Healthcare Services Inc (AMN) Dividend Yield: 0.00%
One-Year Trailing (as of June 16, 2023)AMN Healthcare Services Fundamentals
QVI Research Report’s fundamentals section measures the performance strength of the company’s senior management by analyzing revenue growth, net profit margin, and returns on equity and invested capital.
Revenue Growth and Net Profit Margin
Per the chart below, AMN Healthcare Services had positive, three-year annualized double-digit revenue growth of 33.13%, far outperforming the 7.60% median growth of the health care sector.
Farther down the income statement, AMN Healthcare Services had a trailing three-year mid-single-digit net profit margin of 7.36%, exceeding the sector’s median negative net margin of -7.30%.
Returns on Equity and Invested Capital
AMN Healthcare Services’ management produced a trailing three-year return on equity or ROE of 28.92%, surpassing the targeted threshold and the sector’s negative median ROE of -42.62%.
Stock buyback programs often elevate ROE. For example, in 2022, AMN’s board of directors authorized a $250 million repurchase program.
At 15.14%, AMN Healthcare Services’ three-year return on invested capital, or ROIC, exceeded the QVI threshold and the sector’s negative median ROIC of -23.12%, indicating that its senior executives are excellent capital allocators.
In addition, AMN Healthcare Services’ ROIC was three times its weighted average cost of capital, or WACC, of 4.96%. (Source of WACC: GuruFocus).
With high double-digit revenue growth, sector-beating net profit margin, and robust returns on equity and capital, AMN Healthcare Services’ management benefited from the pandemic. It appears capable of continuing its stellar if not endemic-tempered, c-suite performance in Dallas.
QVI’s fundamentals rating for AMN Healthcare Services: Bullish.
AMN Returns on Management
AMN Healthcare Services Inc (AMN) Revenue (3y Growth): 33.13%
AMN Healthcare Services Inc (AMN) Profit Margin (3y Median): 7.36%
AMN Healthcare Services Inc (AMN) ROE (3y Median): 28.92%
AMN Healthcare Services Inc (AMN) ROIC (3y Median): 15.14%
Three-Year Trailing (as of June 16, 2023)AMN Valuation, Risks, and Investment Thesis
Next, QVI dives into the valuation multiples, downside risks, and overall investment thesis of AMN Healthcare Services (AMN), including potential catalysts. So let’s dig further after reading the required disclosures and background information.
Disclosure: I/we have no beneficial position through direct ownership of any stock mentioned in this report. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this article.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in their own research or due diligence and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.
About the Writer
David J. Waldron is contributing editor of Quality Value Investing and author of the international-selling book, Build Wealth with Common Stocks: Market-Beating Strategies for the Individual Investor. David’s mission is to inspire the achievement of his readers’ financial goals and dreams. He received a Bachelor of Science in business studies as a Garden State Scholar at Stockton University and completed The Practice of Management Program at Brown University.
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