Is AMN Healthcare Services Inc (AMN, Financial) modestly undervalued? With a daily gain of 4.2%, a 3-month loss of 19.52%, and an Earnings Per Share (EPS) of 7.55, we aim to answer this question. This article delves into the valuation analysis of AMN Healthcare Services, providing an informative assessment of its intrinsic value.
Company Introduction
AMN Healthcare Services is one of the largest healthcare staffing companies in the United States. In 2022, it offered almost 12,000 nurses and allied healthcare full-time workers with provider clients nationwide. About two-thirds of its business is generated from its temporary nursing division; the other third is generated from its physician placement and technology-backed workplace solutions divisions. With a current stock price of $86.57 and a market cap of $3.30 billion, our analysis aims to determine if AMN Healthcare Services is indeed undervalued.
Understanding the GF Value
The GF Value is an estimation of a stock's current intrinsic value, calculated based on historical multiples that the stock has traded at, the GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
According to GuruFocus Value calculation, AMN Healthcare Services stock appears to be modestly undervalued. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. Since AMN Healthcare Services is relatively undervalued, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to understand its financial strength. AMN Healthcare Services has a cash-to-debt ratio of 0.01, which ranks worse than 97.23% of 650 companies in the Healthcare Providers & Services industry. The overall financial strength of AMN Healthcare Services is 6 out of 10, which indicates that the financial strength of AMN Healthcare Services is fair.
Profitability and Growth
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. AMN Healthcare Services has been profitable for 10 out of the past 10 years. Over the past twelve months, the company had a revenue of $4.40 billion and Earnings Per Share (EPS) of $7.55. Its operating margin is 10.79%, which ranks better than 72.63% of 654 companies in the Healthcare Providers & Services industry. Overall, the profitability of AMN Healthcare Services is ranked 9 out of 10, which indicates strong profitability.
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term stock performance of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of AMN Healthcare Services is 35.8%, which ranks better than 87.46% of 566 companies in the Healthcare Providers & Services industry. The 3-year average EBITDA growth rate is 52.3%, which ranks better than 88.95% of 516 companies in the Healthcare Providers & Services industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, AMN Healthcare Services's return on invested capital is 15.97, and its cost of capital is 5.91.
Conclusion
In summary, the stock of AMN Healthcare Services appears to be modestly undervalued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 88.95% of 516 companies in the Healthcare Providers & Services industry. To learn more about AMN Healthcare Services stock, you can check out its 30-Year Financials here.
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