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3 Reasons to Add AMN Healthcare (AMN) to Your Portfolio

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AMN Healthcare Services, Inc. (AMN - Free Report) has been gaining from its broad array of services. Solid performance in the first quarter of 2021 and its strength in staffing service also buoy optimism. However, a stiff competitive landscape and dependence on third parties are concerning for the company.

Over the past year, the Zacks Rank #1 (Strong Buy) stock has surged 122.6% compared with 12.9% growth of the industry and 38.9% rise of the S&P 500.

The renowned player in the healthcare total talent services space has a market capitalization of $4.58 billion. The company projects 6.5% growth for the next five years and expects to witness continued improvements in its business. AMN Healthcare surpassed the Zacks Consensus Estimates in all of the trailing four quarters, delivering an earnings surprise of 21.99%, on average.

Zacks Investment ResearchImage Source: Zacks Investment Research

Let’s delve deeper.

Staffing Service Strength: We are upbeat about AMN Healthcare’s staffing services, which have been instrumental in driving its top line in recent times. The Nurse and Allied Solutions and Other Workforce Solutions units offer services like travel nurse staffing, allied staffing, rapid response nurse staffing and others. In the first quarter of 2021, the Nurse and Allied Solutions segment’s revenues surged significantly year over year. Travel nurse staffing and Allied division revenues also demonstrated year-over-year growth.

Broad Array of Services: AMN Healthcare’s business has gradually evolved beyond traditional healthcare staffing, raising optimism. The company has become a strategic workforce solutions partner with its clients, which is impressive.

Further, the company has also displayed strength in digital health capabilities with its AMN Passport and AMN Cares. The first one is the company’s mobile app for healthcare experts, while the latter is a telehealth platform allowing care teams to interface with employees or patients at home. The company also expanded its scalable vendor management systems (“VMS”) solution, enabling a wide array of healthcare facilities to quickly staff and manage their entire range of contingent talent.

Strong Q1 Results: AMN Healthcare’s solid first-quarter 2021 results raise our sentiments. The company recorded strength in segmental performance in the first quarter. Robust growth in the company’s VMS business and strength in the locum tenens business in the quarter are impressive. Management is upbeat about the acquisitions of Stratus Video and b4 Health, that continue to contribute to the company’s favorable performance. Continued momentum of the telehealth platform also drove the share price.

AMN Healthcare’s foray into the post-acute care market with the acquisition of the telehealth company Synzi, in April, is encouraging as well.

However, downsides might result from AMN Healthcare’s dependence on third parties. The company outsources and offshores certain critical applications or business processes to external providers, including cloud-based credentialing and data processing services. Hence, the failure or inability to perform by one or more of these critical suppliers could cause significant disruptions to AMN Healthcare’s operations and raise costs for the company.

AMN Healthcare faces significant competition in the Medical Services industry. The company competes in national, regional and local markets for healthcare organization clients and professionals. Larger firms also generally have a deeper, more comprehensive infrastructure, with a more established operating model and processes that provide the long-term stability and foundation for quality standards recognition.

Estimate Trend

AMN Healthcare has been witnessing an upward estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 21.3% north to $5.06.

The Zacks Consensus Estimate for second-quarter 2021 revenues is pegged at $829.4 million, suggesting a 36.3% rise from the year-ago reported number.

Other Key Picks

A few other top-ranked stocks from the broader medical space are Veeva Systems Inc. (VEEV - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and National Vision Holdings, Inc. (EYE - Free Report) .

Veeva Systems’ long-term earnings growth rate is estimated at 15.8%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein’s long-term earnings growth rate is estimated at 11.2%. It currently flaunts a Zacks Rank #1.

National Vision’s long-term earnings growth rate is estimated at 23%. It currently sports a Zacks Rank #1.

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