The stock of AMN Healthcare Services (NYSE:AMN, 30-year Financials) is believed to be fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. 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. At its current price of $74.95 per share and the market cap of $3.5 billion, AMN Healthcare Services stock is believed to be fairly valued. GF Value for AMN Healthcare Services is shown in the chart below.
Because AMN Healthcare Services is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 7.7% over the past three years and is estimated to grow 6.17% annually over the next three to five years.
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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. AMN Healthcare Services has a cash-to-debt ratio of 0.03, which ranks in the bottom 10% of the companies in the industry of Healthcare Providers & Services. Based on this, GuruFocus ranks AMN Healthcare Services's financial strength as 4 out of 10, suggesting poor balance sheet. This is the debt and cash of AMN Healthcare Services over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. AMN Healthcare Services has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $2.4 billion and earnings of $1.48 a share. Its operating margin is 6.24%, which ranks in the middle range of the companies in the industry of Healthcare Providers & Services. Overall, GuruFocus ranks the profitability of AMN Healthcare Services at 6 out of 10, which indicates fair profitability. This is the revenue and net income of AMN Healthcare Services over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of AMN Healthcare Services is 7.7%, which ranks in the middle range of the companies in the industry of Healthcare Providers & Services. The 3-year average EBITDA growth is 1%, which ranks in the middle range of the companies in the industry of Healthcare Providers & Services.
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 5.76, and its cost of capital is 3.83. The historical ROIC vs WACC comparison of AMN Healthcare Services is shown below:
In conclusion, AMN Healthcare Services (NYSE:AMN, 30-year Financials) stock gives every indication of being fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks in the middle range of the companies in the industry of Healthcare Providers & Services. To learn more about AMN Healthcare Services stock, you can check out its 30-year Financials here.
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