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Sunday, 4 February 2007
AMN Healthcare Services (AHS) "Long-Term Review #4"

 

 

 

 

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisors prior to making any investment decisions based on information on this website.

I try to do several things at the same time on this blog: review stocks of interest, share with a trading portfolio, and discuss portfolio management strategies that I actually employ.  Additionally, to determine if the picks I discuss are any good, I have been trying to review these selections and find out how they would have turned out if I had indeed purchased shares.  I do occasionally purchase shares in the stocks I discuss and I try to let you know when and if I own shares when I discuss equities.  However, most stocks I discuss I do not have any shares in them, I just feel they are worth attention and become my "vocabulary" of investing.  In the last few months, I have started going back to the beginning of this website, which had its birth back in May, 2003, almost four years ago!  I am trying to write these stocks up in order, reviewing any "pick" that is still traded.

On January 28, 2007, I reviewed HealthExtras (HLEX) my 'pick #3' on this blog.  Today, let's take a look at AMN Healthcare Services (AHS), my 'pick #4' which was posted on  May 15, 2003, on Stock Picks Bob's Advice!

 

I wrote:

"Thursday, 15 May 2003

 May 15, 2003 AMN Healthcare Services (AHS)

Scanning through the NYSE best advancers, AHS shows up. Stock is at $10.05 up $.53 for a 5.7% gain or thereabouts. Last quarter just reported is a little confusing--reported on April 29th, showing a 15% increase in revenue with a 21% increase in earnings per share. The company which apparently does 'locums' healthcare people has had a fairly meteoric growth in revenue from $68.8 million in 1997 to 87.7 million in 1998, 146.5 million in 1999, and 230.8 million in 2000, 517.8 million in 2001 and 663.8 million for the trailing 12 months....at least on Morningstar. With the last quarter at 199 million....extrapolating gets about 800 million for next 12 months. However, short term, same day they also reported they expect to miss Wall Street's estimates for the coming quarter. Cash flow wise they are still burning some cash...at least as of 2002 Morningstar website....may actually be cash flow positive at this time based on trends. Anyhow, that 's a provocative pick for this site....I don't own any. Actually hit an 8% stop today on my portfolio with ITIC....a title insurance company...that has low daily volume and thus liquidity. Something probably to avoid to escape the subsequent volatility that comes with very few shares traded daily. Good luck! Bob"

 

AHS closed at $26.34 on February 2, 2007, for a gain of $16.29 or 162.1% since posting!

Let's take a closer look at this company and see how it is doing today!

What exactly does this company do?

According to the Yahoo "Profile" on AMN Healthcare (AHS), the company

"...engages in the recruitment and placement of physicians, nurses, and allied health professionals on a temporary or permanent basis at acute-care hospitals and other healthcare facilities in the United States and internationally."

How did they do in the latest quarter?

On November 1, 2006, AHS reported 3rd quarter 2006 results.  Revenue came in at $282.7 million, a 69% increase from the $166.9 million in revenue reported in the same quarter last year.  Net income climbed 38.3% to $9.4 million from $6.8 million last year.  This represented a 27.3% increase on a per diluted share basis from $.22/share last year to $.28/share this year.  In the same report the company raised guidance for full year revenue and diluted eps from prior guidance given in August, 2006.  New guidance was fully year 2006 revenue from $1.07 billion to $1.08 billion, and full year diluted eps to range from $.94 to $.96/share.

How about longer-term results?

Reviewing the Morningstar.com "5-Yr Restated" financials on AHS, we find that  revenue has been erratic with $518 million in 2001 increasing to $776 million in 2002, before dropping to $629 million in 2004.  Since 2004, revenue has again been on the rise increasing to $706 million in 2005 and $1.02 billion in the Trailing Twelve Months (TTM).  

Earnings also dipped from $1.12 in 2002 to a low of $.55/share in 2004, before rebounding to $.69/share in 2005 and $.94/share in the TTM.

The company has reduced its shares outstanding overall with 43 million in 2002, dropping to 29 million in 2005 before rebounding slightly to 34 million shares in the TTM.

Free cash flow numbers are not reported on Morningstar.

The balance sheet looks solid with $3.5 million in cash and $217.7 million in other current assets reported on Morningstar.com.  This total of $221.2 million can easily cover the $110.2 million in current liabilities yielding a current ratio of 2.01.  In addition, the company has another $272 million in long-term liabilities.

How about some valuation numbers on this stock?

Looking at the Yahoo "Key Statistics" on AMH Healthcare (AHS), we can see that this is a small cap stock with a market capitalization of $896.2 million.  (The definition of small cap, mid cap, and large cap varies by the source.  In this glossary, the definition for a small cap stock is between $250 million to $1 billion.)  The trailing p/e is a moderate 28.11 with a forward p/e (fye 31-Dec-07) estimated at 22.13.  The PEG (5 yr expected) is a reasonable 1.43.

According to the Fidelity.com eresearch website, the Price/Sales is reasonable for AHS at 0.83, with an industry average of 1.07.  The Return on Equity (ROE TTM) is a reasonable 15.34%, with an industry average of 15.61%.  Thus the company, by this profitability measurement, is about as profitable as similar companies in the same industry as measured by the ROE.

Finishing up with Yahoo, we find that there are 34.03 million shares outstanding with 33.57 million that float.  As of 1/9/07, it is reported that there are 1.85 million shares out short representing 5.5% of the float or 5.9 trading days of volume.  This is almost twice my '3 day rule' for short interest and may well represent a potential 'short squeeze' if the company, which is expected to report earnings any day, comes in with a strong report.

No cash dividend is paid and no stock split is reported on Yahoo.

What does the chart look like?

If we examine a "Point & Figure" chart on AHS from StockCharts.com, we can see how the 'turn-around' in 2004, as noted by the Morningstar.com report, is seen in the chart as well.  The stock price had been declining from a high of $37 in June, 2002, to a low of $9.00 in April, 2003, a month before being 'picked' on the blog.  The stock subsequently has moved steadily higher, and is now just a few points under its recent high of $28.  The stock has a way to go before reaching its prior high on this chart back at the $37 level.


 

 

Summary:  What do I think about this stock?

This stock actually turned out to be a terrific stock that I "picked" on the blog, when technically, it was just turning itself out from a prolonged downward price correction.  If I were using the charts, well, I probably would never have posted this one.  Recent earnings have been very strong and the company has raised guidance.   Valuation appears reasonable with a p/e in the 20's and a PEG under 1.5.  The Morningstar.com page is missing the free cash flow, which is unfortunate, but otherwise the results look nice and the balance sheet looks solid. The chart even looks nice with the stock clearly moving higher breaking the trend from the last several years.  If I were buying stock, and this one was on the top % list, I might well pick this stock once again!

Thanks again for visiting!  I hope you all have a great week trading coming up.  And be sure to leave a comment on the blog or email me at bobsadviceforstocks@lycos.com if you have any comments or questions.  You are welcome to come and visit my Stock Picks Podcast website as well where I discuss some of the many stocks I write about here on the blog!

Bob  


Posted by bobsadviceforstocks at 8:43 PM CST | Post Comment | Permalink

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