AMN Healthcare Services Inc (AMN, Financial), a leading healthcare staffing company in the United States, has recently experienced a daily loss of -7.7% and a 3-month loss of -33.84%. Despite these losses, the company's Earnings Per Share (EPS) sits at a healthy 7.55. This raises a critical question: Is AMN Healthcare Services significantly undervalued? This comprehensive analysis aims to answer this question by delving into the company's valuation, financial strength, profitability, and growth.
Company Overview
AMN Healthcare Services is one of the largest healthcare staffing companies in the United States. In 2022, it provided almost 12,000 full-time nurses and allied healthcare workers to provider clients nationwide. Approximately two-thirds of its business is generated from its temporary nursing division, with the remaining third coming from its physician placement and technology-backed workplace solutions divisions. The company's current stock price is $67.15, with a market cap of $2.60 billion. However, the GuruFocus proprietary GF Value estimates the company's fair value to be $117.9, suggesting that the stock may be significantly undervalued.
Understanding the GuruFocus Value (GF Value)
The GF Value is a proprietary measure of a stock's intrinsic value, derived from historical trading multiples, an internal adjustment based on the company's past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the stock's fair trading value. If the stock price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued and have high future returns. Based on this methodology, GuruFocus estimates that AMN Healthcare Services is significantly undervalued.
Given that AMN Healthcare Services is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
Examining Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before purchasing shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. AMN Healthcare Services has a cash-to-debt ratio of 0.01, ranking worse than 96.49% of companies in the Healthcare Providers & Services industry. However, the overall financial strength of AMN Healthcare Services is fair, with a score of 6 out of 10.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. AMN Healthcare Services has been profitable 10 years over the past 10 years, with an operating margin of 10.79% that is better than 71.73% of companies in the Healthcare Providers & Services industry. Overall, GuruFocus ranks AMN Healthcare Services's profitability as strong.
Growth is a critical factor in a company's valuation. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of AMN Healthcare Services is 35.8%, which ranks better than 87.41% of companies in the Healthcare Providers & Services industry. The 3-year average EBITDA growth rate is 52.3%, which ranks better than 89.08% of companies in the Healthcare Providers & Services industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) and the Weighted Average Cost of Capital (WACC) is another way to evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, AMN Healthcare Services's ROIC is 15.97, and its WACC is 5.74.
Conclusion
In conclusion, AMN Healthcare Services (AMN, Financial) stock is estimated to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 89.08% of companies in the Healthcare Providers & Services industry. For more detailed financial information, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
