IHF - Cross Country Healthcare: Volatile Earnings But A Low P/E - Shares At A Key Technical Spot

Summary

• Healthcare providers have been a source of relative safety this year, but the group has given back some gains against the SPX lately.
• One small-cap sports a good valuation using forward numbers, but market risks could hinder earnings soon.
• With the stock at an important point on the chart, I suggest a wait-and-see approach for now.

Healthcare providers have enjoyed a strong 2022 relative to the S&P 500. The iShares U.S. Healthcare Providers ETF ( IHF ) is down just 4% while the broad market is off closer to 18% on the year. I see risks, however, as many of the area's big names petered out more than a month ago. One smaller firm demonstrates similar dicey price action, but does a compelling valuation using normalized earnings overshadow somewhat bearish recent price action? Let's find out.

Healthcare Providers: Shares Sideways In 2022

According to Bank of America Global Research, Cross Country Healthcare ( CCRN ) is a healthcare staffing company, which sources and recruits nurses, physicians, and other allied healthcare professionals to work on temporary assignments in healthcare facilities in the U.S. The company also provides talent management software as well as recruitment, processing, and consulting services.

The Florida-based $1.1 billion market cap Health Care Providers & Services industry company within the Health Care sector trades at a low 4.9 trailing 12-month GAAP price-to-earnings ratio and does not pay a dividend, according to The Wall Street Journal .

With short interest above 10%, shares in this small-cap can quickly jump on a moment's notice. Indeed, there was positive news reported in early November when CCRN beat on both the top and bottom lines. Before that, though, shares were cut to hold by analysts at Truist despite Cross Country raising its earnings outlook in September. So, there's been a mixed bag of headlines, but the bears are winning the day lately.

There's upside potential with this firm if it can manage its costs well or if the market for healthcare staffing improves in the post-Covid world. Downside risks include dampened demand from a possibly smaller physical operations presence.

On valuation, analysts at BofA see earnings having risen sharply in 2022 but then falling hard next year. EPS appears to normalize in the low $3s with steadier growth in 2024. A higher, near market, multiple suggests the stock is attractively valued today. The Bloomberg consensus EPS outlook Is about in-line with what BofA sees. Seeking Alpha rates the stock with an A valuation rating . I think shares sport value, but we need to see how earnings verify in the coming quarters due to bottom-line volatility.

CCRN: Earnings, Valuation, Dividend Forecasts

Looking ahead, corporate event data provided by Wall Street Horizon show an unconfirmed Q4 2022 earnings date of Wednesday, February 22. The calendar is light aside from that event.

Corporate Event Calendar

The Technical Take

CCRN had been a big winner since Q2 back in late October. As the broad market rallied, CCRN was rolling over. Shares have now fallen below the key $30 level but are making an intraday comeback as I pen this analysis. Traders should monitor how the stock does at this critical spot. If it indeed loses it, then I see downside risks to near $24. Notice how that's where the stock's range peaked earlier this year, along with where a high amount of volume of shares traded. The all-time high of $40 could be a place of profit-taking on a big rally.

CCRN: $30 A Pivotal Price Potentially

The Bottom Line

I like the value case on CCRN, but earnings growth uncertainty is elevated. The technicals also suggest some caution. Overall, I am a hold on the stock for now, but if it gets back above $30, then it's worth owning.

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