AMN Healthcare Services: [NYSE:AHS] Dec. 29, 2007 close: $16.97
52-week range: $16.40 - $29.10
AHS provides temporary and long-term healthcare staffing to hospitals and clinics. They place MD's, nurses, therapists and medical technicians for periods from a few days to two years in duration.
After a period of substantial earnings growth from 2004 - 2006, EPS are likely to be up just slightly in 2007. Because of the slowdown in growth the shares have retreated from February highs of over $29 to today's $16.97.
Is this warranted? EPS are expected to finish at $1.04 for 2007 and consensus estimates for 2008 are for 15.4% growth to $1.20 /share. This makes the P/E just under 14.2X forward earnings versus typical P/E's of over 20X. In fact, these shares had average P/E's of 21.8, 27.9, 22.9 and 21.8 in four of the past five years.
Value Line assumes a 20 multiple for the 3 - 5 year time frame. If AHS hits the expectaions for 2008 then a reasonable target price of 20X $1.20 would be $24 or up 41% from the current level.
Risk appears limited as the 2006 and 2007 lows were $17.30 and $16.40 even during brutal sell-offs in the overall market.
Korn/Ferry International: [NYSE:KFY] Dec. 29, 2007 close: $18.87
52-week range: $15.35 - $27.13
Korn/Ferry provides executive recruitment services globally to many of the world's top companies. They are debt free and had over $245 MM in cash as of July 31, 2007.
Earnings are expected to come in at an all-time record $1.47/share for the FY ending April 20, 2008. The following FY's estimate is now at $1.52 taking into account the possibiliity of a slowing economy.
Thus, KFY's P/E is now a very low [by historical standards] 12.8X current earnings. Value Line feels a 17.5X multiple is justified for the long term for KFY.
At 17.5X the next 12 month's projection KFY shares would reach $26.25 or up 39% from today's level. In a hot market back in 1999 - 2000 these shares peaked out at $36.60 and $44.10 . In June this year they touched $27.10 making the goal price seem very attainable.
Sales, cash flow, earnings and book value are all at record levels now and all estimates look even better going forward.
Risk? The absolute lows for 2006 and 2007 were $17.70 and $16.30 respectively during very bad market conditions.
Ingram Micro, Inc. [NYSE:IM] Dec. 29, 2007 close: $18.36
52-week range: $17.81 - $22.50
Ingram Micro is the world's largest [by revenues] distributor of computer products and services. Estimated sales for 2007 > $34 billion. This is an indirect play on the global growth in computer sales and useage.
Large capital outlays early in 2007 hurt first half earnings but the September quarter showed good growth [$0.39 v. $0.34 year-over-year] and each of the next five quarters is expected to show very positve comparisons.
The 2008 consensus estimate is now $1.96/share up from $1.50 [including one-time items] or $1.74 on a non-GAAP basis for 2007. IM now trades at just 9.4X next year's estimate.
Third Avenue Management [Marty Whitman's shop] owns almost 1.6MM shares of IM.
Ingram's 10-year median P/E has been 19X but Value Line is assuming a more modest 16X multiple for its normalized level. 16 times next year's estimate of $1.96 brings me to a 12- month target price of $31.36 or plus 70% from today's quote.
Risk? IM shares bottomed at $16.50 and $17.81 in 2006 and 2007 so there doesn't appear to be a lot of downside, especially considering the greatly improving earnings picture.
If you're willing to play with small to mid-cap stocks, these three look to offer good risk/reward characteristics and would seem relatively immune to the credit market worries that face many companies.