AMN Healthcare: Perfect Storm?

10/20/2015 8:00 am EST

Focus: STOCKS

Tom Bishop

Founder, BI Research

Did you know that there is a serious shortage of physicians and nurses as well as other healthcare workers? Indeed there is, and the need is only intensifying, explains small-cap expert Tom Bishop, editor of BI Research.

The system is already stretched and in the next five years 5 million additional healthcare workers will be needed. This represents 1/3 of the total labor market growth expected over this period.

The drivers for this are in part demographic, as baby boomers are retiring. Some 55% of nurses are expected to retire in the next seven years.

Also, at 65 years of age and older, hospital stays are three times that of a 40-year-old, and at 75, it’s four times. So you can see the double edge to this sword.

Meanwhile, there is a trend to hospitals looking for ways to streamline operations and become more efficient, including determining the optimal mix of permanent vs. temporary medical staffing.

And with the Affordable Care Act increasing the ranks of those with access to healthcare, there is sort of a perfect storm creating more demand for both temporary and permanent healthcare staff placement.

AMN Healthcare Services (AHS) is the largest healthcare staffing company in the country with revenues of $1.4 billion expected this year. However, this represents just a 10% market share, leaving plenty of room for growth.

Beyond nurses and physicians, the company also handles the placement of physician’s assistants, psychiatrists, nutritionists, diagnostic lab workers, physical therapists, and other allied workers in the healthcare field.

AHS has been growing organically and via acquisition. Adjusted EPS in the second quarter weighed in at $0.38 vs. last year’s $0.21, while revenues for the quarter rose 40% to $350 million.

For Q3, analysts see adjusted EPS of $.34 vs. last year’s $.18, on guidance of $360 to $365 million.

This should lead to full year revenues of about $1.4 billion and adjusted EPS of $1.33. Note that estimates for 2015 started out at around $.85.

EPS for 2016 should be in the $1.50 to $1.60 range, with the higher end (or above) depending on acquisitions.

Of course, I always like a company when we rate a stock a buy and we sure have it here. All five analysts following the company rate it a strong buy.

Zacks ranks it 1, Value Line 2, and the stock is number 2 in the IBD-50 with a highest possible composite rating of 99.

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