By temporary healthcare staffing revenue, AMN Healthcare Services (AMN) is the largest firm in the U.S. The company is also the outright leader in most business segments in which it competes, asserts Douglas Gerlach, editor of SmallCap Informer.
AMN Healthcare offers talent solutions for healthcare organizations across the nation. The company provides access to healthcare professionals, through temporary staffing, executive search, vendor management, recruitment outsourcing, and other services.
Its Locum Tenens Solutions segment places physicians and clinicians in temporary assignments, and generated 14% of 2019 revenue. Nurse and Allied Solutions provides short- and long-term staffing for nurses, therapists, and technicians, and contributed 61%. Other Workforce Solutions offers executive search, recruitment, vendor management, language interpretation, and credentialing, and was 25% of revenue.
AMN Healthcare’s acquisitions have contributed to the company’s growth. Of particular interest is its February 2020 acquisition of Stratus Video, a video remote language interpretation service used to facilitate interactions between staff and patients using video or phone, and its December 2020 purchase of B4health, a vendor management software for shift management and workflow organization.
Healthcare staffing in the U.S is a $5 billion addressable market, and hiring has struggled to match needs. Hiring is largely offset by voluntary attrition and one-third of the healthcare workforce turns over each year.
Currently, around 50% of RNs and physicians are older than 50, and more than 38% of active physicians are older than 56. This puts pressure on employers to maintain staffing levels. The aging population in the U.S. is increasing utilization of healthcare.
These factors together are pointing to a serious healthcare shortage that will only grow in the coming decade. The long-term EPS growth rate projection from Wall Street’s analysts is 12.5%. We are basing our model on 10% annualized growth of EPS and revenues.
With recent acquisitions under its wing, AMN's price looks attractive and its outlook appears positive in the near- and long-term, so it’s worth a second look.
Our upside price target is $106 based on a high P/E reached at 20.8. On the downside, a low P/E of 12.3 times 2019’s adjusted EPS provides a bottom at $39. The upside-downside ratio is 5.9-to-1 and the compound annual return would be 16.9%.