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Aggressive Growth

AMN Healthcare Services Inc. (AHS - Snapshot Report) has amassed a year-to-date return of 167.2% and is now hovering close to its 52-week high of $11.66. Furthermore, earnings estimates have been on the rise since its solid third-quarter results last month, helping the stock attain Zacks #1 Rank (Strong Buy) status on December 13.

This provider of healthcare staffing and clinical workforce management solutions has outperformed the Zacks Consensus Estimate in 5 of the last 7 quarters, while matching in the remaining two. Looking at the earnings surprise trend over the last seven quarters, AMN Healthcare has topped estimates by an average of 117%.

Fabulous Q3, Upbeat Guidance

AMN Healthcare Services reported impressive third-quarter results on November 1, with earnings per share of 12 cents that beat the Zacks Consensus Estimate by 20%. It also surged 140% from the prior-year quarter. The quarter’s earnings were aided by improving demand and constructive implementation of strategy in its core staffing and recruitment services and workforce solutions.

Consolidated revenue of $243.9 million surpassed the Zacks Consensus Estimate of $239 million, and rose 7% year over year. Sales increased in the Nurse and Allied Healthcare Staffing (up 13%) and Physician Permanent Placement Services (up 9%) segments, partly mitigated by a sales decline at the Locum Tenens Staffing segment (down 6%). Gross profit jumped 9% to $69.6 million, whereas gross margin expanded 70 basis points to 28.5%.

Management now expects fourth quarter consolidated revenue between $240 million and $244 million, reflecting year-over-year growth of 8% to 10%. Gross margin is projected between 28% and 28.5%.

Impressive Earnings Estimates Revisions

The Zacks Consensus Estimate for 2012 rose 7.7% to 42 cents per share in the last 60 days on upward revisions from 5 of 6 estimates. The current estimate implies a year-over-year jump of 196.4%.

For 2013, the Zacks Consensus Estimate has advanced 10.2% to 54 cents per share in the same time, as 4 of 6 estimates were revised higher. The current estimate suggests a year-over-year increase of 29.3%.

Premium Valuation

AMN Healthcare Services currently trades at a forward P/E of 27.11x, reflecting a 46.9% premium to the peer group average of 18.46x. Also, on a price-to-book basis, shares trade at 3.05x, a substantial premium to the peer group average of 2.08x. However, on price-to-sales basis, the stock trades at 0.54x, a discount to the peer group average of 0.70x. Given its strong fundamentals, the premium valuation is justified.

A Look at the Chart

The 12-month EPS chart below indicates that the stock price has now started correlating with the increasing trend in estimates. Currently, the stock price is in the range of $10.00–$12.00, and the consensus estimates for 2012 and 2013 are steadily moving upward. The year-to-date return for the stock is 167.2%, compared with the S&P 500’s return of 10.7%.

AMN Healthcare Services offers healthcare recruitment and clinical staff management solutions in the U.S., and operates under three segments – Nurse and Allied Healthcare Staffing, Locum Tenens Staffing and Physician Permanent Placement Services. The company provides staffing solutions for hospitals and other healthcare institutions, provides physicians on a temporary and permanent basis, and offers a recruitment process outsourcing program. The company has a market cap of $499.3 million, and primarily competes with Cross Country Healthcare, Inc. (CCRN) and On Assignment Inc. (ASGN).


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