AMN Healthcare To Continue Downward Trend

| About: AMN Healthcare (AMN)

Summary

AMN Healthcare Services has done very well in recent years, showing a large margin of growth in the past two years.

The company has a wide range of clients and subsidiaries to maintain the growth that they are currently experiencing.

The stock followed an upward trend until earlier in the 2016 year when it started to follow an abrupt downward trend.

By Jack Mason and Matthew Megarity

AMN Healthcare Services, Inc. (AHS) Underperform

Valuation Range: $24 to $28 Current Value: $33.84

Company Background: AMN Healthcare Services is an industry leading healthcare staffing, recruitment, and workforce solutions brand that works from a range of temporary staffing services to permanent placement. American Mobile Nurses Incorporated was originally founded in 1985 and moved to its current company location in San Diego, California. The company later merged with American Mobile Therapists in 1994 to officially become ANM Healthcare Services, Inc. The company includes nearly two dozen diverse subsidiaries, expanding and broadening its client base. The company went public in November of 2001 and has continued to grow ever since, resulting in a gross profit of $469.4 million which is a 48% increase from the 2014 year.

A Bear Analysis

A Bull Analysis

· Healthcare industry shortage of workers could possibly strain the revenue and profits of AMN.

· Changes to regulations in Healthcare have created uncertainty for the immediate future.

· As the number of nurses and physicians increase at AMN, the possibility of litigation may also increase.

· With AMN's strong company foundation, they will be able to accommodate the increase in the staffing demand, due to the growth of the healthcare industry.

· Demographic changes to the U.S. population will drive an increase in demand for AMN's services.

· Due to their large nationwide client base, the company is able to keep a large supply of quality workers.

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Investment Catalysts: AMN Healthcare Services is one of the largest providers of healthcare services in the world. AMN's revenue has drastically increased over recent years, from $1.012 billion in 2013 to $1.463 billion in 2015, totaling a 44.6% increase in revenue in the span of two years. Net Income also saw a substantial increase over a two-year period with $33 million in 2013 to $82 million in 2015. The company's total assets in 2013 was $604.3 million increasing to $680.7 million in 2014, and the most recent total assets of the last accounting period amounted to $880.4 million in 2015, showing the healthy growth of AMN Healthcare Services over the recent years.

AMN has grown considerably in recent years. One aspect of growth is the solid long-term drivers of the healthcare industry. The aging population of the "Baby Boomer" generation has created a sharp and immediate increase in the healthcare industry, expanding their client base. The greater accessibility of healthcare due to the Affordable Healthcare Act has also expanded the number of people who can afford healthcare. Another reason for growth is that more people have been drawn to work in the field of healthcare. Due to better benefits and a higher level of job security, workers are effectively drawn to the industry. 14.3 million are currently employed in the healthcare industry and it is projected that nearly 3.2 million jobs will be created within eight years.

Investment Risks: AMN Healthcare Services has multiple risks in the investment of its stock. In the case of economic downturn or slow economic recovery there could be less demand for the company's services. The inability of AMN to quickly respond to changes in market place conditions such as responding to new modes of healthcare and changing client needs could result in a decrease of company growth as well as allowing other competitors to take advantage. Another important risk in AMN is its reliance on third party companies to carry out their functions in the administering of AMN Healthcare. This dependence could easily result in a damaging effect on AMN if the third party company fails in their service.

Valuation: As the current AHS stock stands, we believe that the stock will continue to fall between $24 and $28 per share from its current value of $33.84. The stock price would continue to fall because AHS as well as other healthcare stocks are stagnating currently and trading at low volumes. This stagnation is because of investors being cautious, which will continue throughout the presidential election process. The uncertainty of the future direction of healthcare due to the controversial policies that might be overturned in the coming presidency will continue to cause stagnation or decline in healthcare stock as a whole. As the financial information demonstrates AMN is a growing company that will continue to grow. Once the presidency has been decided, AHS's stock will rebound and continue to grow as it had before the oncoming president. We believe that AHS stock will decline to roughly $26 and then in the near future rebound to roughly $44. Our recommendation is to sell now and buy-low at a decreased price.

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Morningstar Equity Analyst Report

Income Statement

All numbers in thousands

Revenue

12/31/2015

12/31/2014

12/31/2013

Total Revenue

1,463,065

1,036,027

1,011,816

Cost of Revenue

993,702

719,910

714,536

Gross Profit

469,363

316,117

297,280

Operating Expenses

Research Development

-

-

-

Selling General and Administrative

319,531

232,221

218,233

Non Recurring

-

-

-

Others

20,953

15,993

13,545

Total Operating Expenses

-

-

-

Operating Income or Loss

128,879

67,903

65,502

Income from Continuing Operations

Total Other Income/Expenses Net

-

-

-

Earnings Before Interest and Taxes

128,879

67,903

65,502

Interest Expense

7,790

9,237

9,665

Income Before Tax

121,089

58,666

55,837

Income Tax Expense

39,198

25,449

22,904

Minority Interest

-

-

-

Net Income From Continuing Ops

81,891

33,217

32,933

Non-recurring Events

Discontinued Operations

-

-

-

Extraordinary Items

-

-

-

Effect Of Accounting Changes

-

-

-

Other Items

-

-

-

Net Income

Net Income

81,891

33,217

32,933

Preferred Stock And Other Adjustments

-

-

-

Net Income Applicable To Common Shares

81,891

33,217

32,933

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Yahoo Finance: Financials/Income Statement

Cash Flow

All numbers in thousands

Period Ending

12/31/2015

12/31/2014

12/31/2013

Net Income

81,891

33,217

32,933

Operating Activities

Depreciation

20,953

15,993

13,545

Adjustments To Net Income

23,804

26,075

11,001

Changes In Accounts Receivables

-98,018

-52,130

-8,448

Changes In Liabilities

40,709

13,038

25,650

Changes In Inventories

-

-

-

Changes In Other Operating Activities

-13,026

-8,515

-14,512

Total Cash Flow From Operating Activities

56,313

27,678

60,169

Investing Activities

Capital Expenditures

-27,010

-19,134

-9,047

Investments

-1,000

-5,000

-5,000

Other Cash flows from Investing Activities

-88,075

-4,094

-40,151

Total Cash Flows From Investing Activities

-116,085

-28,228

-49,198

Financing Activities

Dividends Paid

-

-

-

Sale Purchase of Stock

3,663

1,792

1,177

Net Borrowings

56,996

2,226

-681

Other Cash Flows from Financing Activities

-11,908

-4,448

-2,670

Total Cash Flows From Financing Activities

56,200

-2,099

-1,017

Effect Of Exchange Rate Changes

75

142

-55

Change In Cash and Cash Equivalents

-3,497

-2,507

9,899

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Yahoo Finance: Financials/Cash Flow

Balance Sheet

All numbers in thousands

Period Ending

12/31/2015

12/31/2014

12/31/2013

Current Assets

Cash And Cash Equivalents

9,576

13,073

15,580

Short Term Investments

-

-

-

Net Receivables

328,803

242,047

190,686

Inventory

-

-

-

Other Current Assets

37,249

27,550

26,631

Total Current Assets

375,628

282,670

232,897

Long Term Investments

-

-

-

Property Plant and Equipment

50,134

32,880

21,158

Goodwill

204,779

154,387

144,642

Intangible Assets

174,970

152,517

150,197

Accumulated Amortization

-

-

-

Other Assets

74,921

58,277

55,394

Deferred Long Term Asset Charges

-

-

-

Total Assets

880,432

680,731

604,288

Current Liabilities

Accounts Payable

202,523

146,988

127,263

Short/Current Long Term Debt

37,500

25,500

10,000

Other Current Liabilities

10,994

5,807

5,827

Total Current Liabilities

251,017

178,295

143,090

Long Term Debt

180,990

135,690

148,672

Other Liabilities

78,134

77,674

77,020

Deferred Long Term Liability Charges

22,431

32,491

17,764

Minority Interest

-

-

-

Negative Goodwill

-

-

-

Total Liabilities

532,572

424,150

386,546

Stockholders' Equity

Misc. Stocks Options Warrants

-

-

-

Redeemable Preferred Stock

-

-

-

Preferred Stock

-

-

-

Common Stock

477

466

460

Retained Earnings

-96,167

-178,058

-211,275

Treasury Stock

-

-

-

Capital Surplus

443,733

434,529

429,055

Other Stockholder Equity

-183

-356

-498

Total Stockholder Equity

347,860

256,581

217,742

Net Tangible Assets

-31,889

-50,323

-77,097

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Yahoo Finance: Financials/Balance Sheet

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.