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($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
You go on vacation and you need a car? You rent one. You’re having a party and you need a tent? You rent one. You going to Vegas to play golf and need clubs? You rent. Why buy when you can rent?
You own a hospital and need a nurse? You rent one. You own a hospital and need a physician? That’s right…you rent one.
Outsourcing is no longer a quirk. It is a standard practice. In today’s information age, it’s going to be and more a way of life.
Today I bought stock in AMN Healthcare Services, Inc. (AHS) at 31.16. I will sell it in 4 to 6 weeks at 35.88. Here’s why I like AMN:
First of all, look at this great chart:
I mean wow….just wow. This stock is up 144% in the last 12 months…just going up and up and up, slow and steady with nothing stopping it. It’s being fueled by amazing earnings growth and has a forward PE of only 25.
AMN Healthcare Services, Inc. provides healthcare workforce solutions and staffing services to healthcare facilities in the United States. It operates through three segments: Nurse and Allied Healthcare Staffing, Locum Tenens Staffing, and Physician Permanent Placement Services. The company was founded in 1985 and is headquartered in San Diego, California.
So to sum it up, they are a medical staffing executive search and consulting company. They are the biggest company in North America that provides this service. It’s servicing an industry that is growing by leaps and bounds because its customers are getting older and older and spending more and more money on health care. Nearly three million baby boomers will hit retirement age every year for about the next twenty years. The number of people over the age of 65 is going to increase by about 40% from 2010 to 2020. In total, it will double by 2030.
Those are over age 65 are -- use physician services twice as often as those under age 65 and are 3 times more likely to end up in a hospital as well. So at the same time, you have this aging US population that is going to drive more demand for healthcare services.
We have an aging physician and clinician population as well. Physicians and nurses, on average, are close to 50 years old and there is not enough new supply coming in to offset this aging population. And the last survey showed that about 55% of nurses are expected to retire within the next seven years.
Despite this fact, hospitals and primary care doctors are already short-staffed. Docs are turning over and selling their sole proprietorships so that they can be 9 to 5 employees and go home and coach Little League. On top of all of this, we are seeing an aging of the clinician and physician population as well. And that environment really starts to create some challenges for hospitals.
You have greater demand and less supply. And as you look ahead to 2025, there is predicted to be about a 90,000-physician shortage. It's a small shortage today, but it is expected to get much more severe. What fills the gap? As the leader in staffing, AMN Health care is in prime position to profit tremendously from this demographic shift.
On top of that, the Affordable Care Act has provided insurance to millions of people who never had insurance before. So they will be seeking medical treatment on top of the already aging population.
Ka Ching.
So what’s so great about AHS?
• Market leader in healthcare staffing and physician search
• Innovator in healthcare workforce solutions: MSP, VMS, RPO, Consulting
• Recent acquisitions: Onward Healthcare, Locum Leaders, Medefis, Avantas
• Strong demand environment; doubledigit organic revenue growth
• Long-term growth supported by aging population, clinical labor shortage
• Scalable, efficient operating model
• Strong cash flow and balance sheet
The long term growth potential of the company is strong with the country's aging population. AMN Healthcare has seen growing demand for their services. In particularly, the Nursing staffing component has seen orders increase by 80% year to year. The ACA will ultimately increase the demand for doctors and nurses.
AMN Healthcare is the leading provider of healthcare workforce solutions and staffing services in the US. They are the largest provider of both temporary and permanent placement services, but they also expanded beyond that to becoming a provider of a more comprehensive set of workforce solutions. On the nursing side, they staff all specialties of nurses. They also do lab technicians, imaging technicians, and pharmacy as well. They staff all physician specialties, from primary care, hospitalist, surgery, behavioral health, and other areas. They also staff advanced practice professionals: nurse practitioners and physician assistants.
With labor costs being almost half of a hospital's cost structure, they are dealing with significant workforce challenges and AHS is the partner to help them deal with those. AMN has become the exclusive outsource provider for all of the hospital’s contingent staffing needs across the full spectrum of physician to nurse. They have a ridiculous network of medical professionals that they can turn to whenever they need staffing. They almost have as many contacts as The Tank Tiger. AMN has had a very strong demand environment since the middle of last year and demand for their services has increased dramatically. They have seen demand more than double. That happened in the third quarter of last year and it has not wanted. This has driven double-digit growth organically across all of their service lines.
AMN has been able to sustain this growth because they have a strong balance sheet. They are opportunistic for acquisitions if the right ones come along that would be accretive to earnings. Their four most recent acquisitions are performing very well. In 1Q they outperformed ANAL-yst guidance on sales and earnings. This is a clear indication of the synergy of their acquisitions.
Looking at the expectations for employment growth in healthcare, the expectation is that overall, there will be about five million more healthcare jobs over the next five years. That represents about a third of the overall US expected employment growth. This is an enormously favorable employment trend. On top of this, The ACA has increased the number of insured Americans, which has increased utilization. With the hospitals already thinly staffed, outsourced employment fills are like manna from heaven. Now that these customers are insured, the hospitals are getting paid for care that previously went unpaid. This will help them afford the temp staffing.
While AHS has put up a historical EPS growth rate of 17%, investors should really focus on the projected growth. Here, AHS is looking to grow at 41%, a rate higher than the industry average which stands at 28%. ANAL-ysts have been raising their estimates for AMN Healthcare lately, and now the earnings picture is looking a bit more favorable for the company. Its strategy is bearing fruit. AMN has logged at least double-digit earnings growth in all but two of the past 12 quarters.
The most recent earnings report, which came out in May, bears this out:
· Consolidated revenue increased 36% year-over-year, driven by organic revenue growth of 22% with the remainder from acquisitions.
· Gross margin of 31.0% represented an improvement of 30 basis points from the prior year and 70 basis points from the prior quarter.
· Adjusted EBITDA margin of 10.2% reflected a 140 basis point improvement from the prior year.
· Adjusted EPS of $0.30 (which excludes amortization of intangible assets and acquisition and integration-related expenses) grew 67% from the prior year.
The Company expects consolidated second quarter 2015 revenue of $335 to $340 million. Gross margin is expected to be 30.5% to 31.0%. SG&A expenses as a percentage of revenue are expected to be 22.0% to 22.5%, slightly higher than first quarter due to increases in employee and other expenses to deliver consistent quality service to our clients. Integration-related expenses are expected to be approximately $1 million. Adjusted EBITDA margin is expected to be approximately 9.5%.
Of course we need to look ahead. ANAL-ysts are estimating earnings of $1.02 per share on revenues of $1.35 billion dollars. How silly. They need to get to a hospital and get their heads examined by some outsourced psychologists. $$$MR. MARKET$$$ knows that 2015 revenues will actually be $1.48 billion and that earnings will be $1.22 per share. If you take the existing PE of 40 and multiply it by $1.22, you get a share price of 40 x $1.22 = $48.31, which is well past my share price.
If you listen to the comments of AMN’s CEO, you’ll know what I am talking about. I think she’s really sharp and in strong command of her enterprise, with really good vision and instincts:
"Amid positive trends in the healthcare industry, we continued to experience strong demand and outstanding execution across all business segments, resulting in better than anticipated revenue and profitability growth during the first quarter," said Susan R. Salka, President and Chief Executive Officer of AMN Healthcare. "The pipeline of opportunities for our strategic workforce solutions offerings remains strong, and our recently added Avantas, Onward Healthcare, Locum Leaders and Medefis companies are performing and integrating very well into AMN's service offerings. Our portfolio of differentiated workforce solutions and stronger recruitment and supply capabilities, combined with the favorable market conditions and the exceptional performance by our team, give us a continued optimistic outlook for 2015."
"For years, the main driver (of our business) was helping clients fill hard-to-fill positions and deal with seasonal fluctuations," said Salka. "Over the past decade more and more health care providers want to outsource the whole procurement and staffing function for temporary and permanent workers."
The result has been a "pickup" in clients; demand to work with one large outsourcing partner to fill their needs, Salka says.
"Our strategy is to continue this evolution of not just being a staffing partner, but a holistic workforce solutions partner," Salka said.
"Our growth strategy is to help clients to be more efficient and effective in managing their entire clinical workforce, both permanent and temporary," said Salka. "It's all about getting the right talent at the right time at the right cost."
“The good news we saw greater than expected performance across all of our businesses. Nursing, allied, physician and perm placement. And I think it is combination of the market itself being extremely robust and accelerating through the quarter which was a bit of surprise to us especially considering last year, remember it actually decelerated a bit. And on top of that really the caliber and quality of our winning team. We have incredible leaders and team members even now we've added more to that recently. We also have the benefit of a lot of experienced in 10 years individuals who know what it take to perform well in this kind of market. And so I think they were able to convert that market opportunity very quickly.”
“The last report they show job openings are up 25% year-over-year within healthcare and the number of quits of about 19%. And I wouldn't be surprised if it is gone up since then based what were anecdotally hearing from our clients and what's driving demand for not only the temporary staffing services but also the demand for our recruitment process outsourcing services. We've seen tremendous increase in the appetite for assistance in permanent placement. So I have to say that, that's got to be a big driver as those clients think about how they are going to address those permanent recruitment challenges not just in a short term but on a longer term basis.”
“We are near historically high demand level across all businesses. And the macro drivers appear unlikely to change in the near term. The US economy continues to show stability particularly from an employment standpoint. Hospitals and ambulatory care providers are experiencing increased volumes due to the aging population and millions of newly insured patients. The clinician shortages are becoming more severe particularly as more of them reach retirement age. With the returns to a supply constrained market place, AMN is very focused on increasing our recruitment capability.”
So I’m not gonna be a sucka…I’m gonna listen to Salka and watch my bank account get healthy with this latest stock pick. I am HUGE!
$$$MR. MARKET$$$
www.mrmarketishuge.com
You go on vacation and you need a car? You rent one. You’re having a party and you need a tent? You rent one. You going to Vegas to play golf and need clubs? You rent. Why buy when you can rent?
You own a hospital and need a nurse? You rent one. You own a hospital and need a physician? That’s right…you rent one.
Outsourcing is no longer a quirk. It is a standard practice. In today’s information age, it’s going to be and more a way of life.
Today I bought stock in AMN Healthcare Services, Inc. (AHS) at 31.16. I will sell it in 4 to 6 weeks at 35.88. Here’s why I like AMN:
First of all, look at this great chart:
I mean wow….just wow. This stock is up 144% in the last 12 months…just going up and up and up, slow and steady with nothing stopping it. It’s being fueled by amazing earnings growth and has a forward PE of only 25.
AMN Healthcare Services, Inc. provides healthcare workforce solutions and staffing services to healthcare facilities in the United States. It operates through three segments: Nurse and Allied Healthcare Staffing, Locum Tenens Staffing, and Physician Permanent Placement Services. The company was founded in 1985 and is headquartered in San Diego, California.
So to sum it up, they are a medical staffing executive search and consulting company. They are the biggest company in North America that provides this service. It’s servicing an industry that is growing by leaps and bounds because its customers are getting older and older and spending more and more money on health care. Nearly three million baby boomers will hit retirement age every year for about the next twenty years. The number of people over the age of 65 is going to increase by about 40% from 2010 to 2020. In total, it will double by 2030.
Those are over age 65 are -- use physician services twice as often as those under age 65 and are 3 times more likely to end up in a hospital as well. So at the same time, you have this aging US population that is going to drive more demand for healthcare services.
We have an aging physician and clinician population as well. Physicians and nurses, on average, are close to 50 years old and there is not enough new supply coming in to offset this aging population. And the last survey showed that about 55% of nurses are expected to retire within the next seven years.
Despite this fact, hospitals and primary care doctors are already short-staffed. Docs are turning over and selling their sole proprietorships so that they can be 9 to 5 employees and go home and coach Little League. On top of all of this, we are seeing an aging of the clinician and physician population as well. And that environment really starts to create some challenges for hospitals.
You have greater demand and less supply. And as you look ahead to 2025, there is predicted to be about a 90,000-physician shortage. It's a small shortage today, but it is expected to get much more severe. What fills the gap? As the leader in staffing, AMN Health care is in prime position to profit tremendously from this demographic shift.
On top of that, the Affordable Care Act has provided insurance to millions of people who never had insurance before. So they will be seeking medical treatment on top of the already aging population.
Ka Ching.
So what’s so great about AHS?
• Market leader in healthcare staffing and physician search
• Innovator in healthcare workforce solutions: MSP, VMS, RPO, Consulting
• Recent acquisitions: Onward Healthcare, Locum Leaders, Medefis, Avantas
• Strong demand environment; doubledigit organic revenue growth
• Long-term growth supported by aging population, clinical labor shortage
• Scalable, efficient operating model
• Strong cash flow and balance sheet
The long term growth potential of the company is strong with the country's aging population. AMN Healthcare has seen growing demand for their services. In particularly, the Nursing staffing component has seen orders increase by 80% year to year. The ACA will ultimately increase the demand for doctors and nurses.
AMN Healthcare is the leading provider of healthcare workforce solutions and staffing services in the US. They are the largest provider of both temporary and permanent placement services, but they also expanded beyond that to becoming a provider of a more comprehensive set of workforce solutions. On the nursing side, they staff all specialties of nurses. They also do lab technicians, imaging technicians, and pharmacy as well. They staff all physician specialties, from primary care, hospitalist, surgery, behavioral health, and other areas. They also staff advanced practice professionals: nurse practitioners and physician assistants.
With labor costs being almost half of a hospital's cost structure, they are dealing with significant workforce challenges and AHS is the partner to help them deal with those. AMN has become the exclusive outsource provider for all of the hospital’s contingent staffing needs across the full spectrum of physician to nurse. They have a ridiculous network of medical professionals that they can turn to whenever they need staffing. They almost have as many contacts as The Tank Tiger. AMN has had a very strong demand environment since the middle of last year and demand for their services has increased dramatically. They have seen demand more than double. That happened in the third quarter of last year and it has not wanted. This has driven double-digit growth organically across all of their service lines.
AMN has been able to sustain this growth because they have a strong balance sheet. They are opportunistic for acquisitions if the right ones come along that would be accretive to earnings. Their four most recent acquisitions are performing very well. In 1Q they outperformed ANAL-yst guidance on sales and earnings. This is a clear indication of the synergy of their acquisitions.
Looking at the expectations for employment growth in healthcare, the expectation is that overall, there will be about five million more healthcare jobs over the next five years. That represents about a third of the overall US expected employment growth. This is an enormously favorable employment trend. On top of this, The ACA has increased the number of insured Americans, which has increased utilization. With the hospitals already thinly staffed, outsourced employment fills are like manna from heaven. Now that these customers are insured, the hospitals are getting paid for care that previously went unpaid. This will help them afford the temp staffing.
While AHS has put up a historical EPS growth rate of 17%, investors should really focus on the projected growth. Here, AHS is looking to grow at 41%, a rate higher than the industry average which stands at 28%. ANAL-ysts have been raising their estimates for AMN Healthcare lately, and now the earnings picture is looking a bit more favorable for the company. Its strategy is bearing fruit. AMN has logged at least double-digit earnings growth in all but two of the past 12 quarters.
The most recent earnings report, which came out in May, bears this out:
· Consolidated revenue increased 36% year-over-year, driven by organic revenue growth of 22% with the remainder from acquisitions.
· Gross margin of 31.0% represented an improvement of 30 basis points from the prior year and 70 basis points from the prior quarter.
· Adjusted EBITDA margin of 10.2% reflected a 140 basis point improvement from the prior year.
· Adjusted EPS of $0.30 (which excludes amortization of intangible assets and acquisition and integration-related expenses) grew 67% from the prior year.
The Company expects consolidated second quarter 2015 revenue of $335 to $340 million. Gross margin is expected to be 30.5% to 31.0%. SG&A expenses as a percentage of revenue are expected to be 22.0% to 22.5%, slightly higher than first quarter due to increases in employee and other expenses to deliver consistent quality service to our clients. Integration-related expenses are expected to be approximately $1 million. Adjusted EBITDA margin is expected to be approximately 9.5%.
Of course we need to look ahead. ANAL-ysts are estimating earnings of $1.02 per share on revenues of $1.35 billion dollars. How silly. They need to get to a hospital and get their heads examined by some outsourced psychologists. $$$MR. MARKET$$$ knows that 2015 revenues will actually be $1.48 billion and that earnings will be $1.22 per share. If you take the existing PE of 40 and multiply it by $1.22, you get a share price of 40 x $1.22 = $48.31, which is well past my share price.
If you listen to the comments of AMN’s CEO, you’ll know what I am talking about. I think she’s really sharp and in strong command of her enterprise, with really good vision and instincts:
"Amid positive trends in the healthcare industry, we continued to experience strong demand and outstanding execution across all business segments, resulting in better than anticipated revenue and profitability growth during the first quarter," said Susan R. Salka, President and Chief Executive Officer of AMN Healthcare. "The pipeline of opportunities for our strategic workforce solutions offerings remains strong, and our recently added Avantas, Onward Healthcare, Locum Leaders and Medefis companies are performing and integrating very well into AMN's service offerings. Our portfolio of differentiated workforce solutions and stronger recruitment and supply capabilities, combined with the favorable market conditions and the exceptional performance by our team, give us a continued optimistic outlook for 2015."
"For years, the main driver (of our business) was helping clients fill hard-to-fill positions and deal with seasonal fluctuations," said Salka. "Over the past decade more and more health care providers want to outsource the whole procurement and staffing function for temporary and permanent workers."
The result has been a "pickup" in clients; demand to work with one large outsourcing partner to fill their needs, Salka says.
"Our strategy is to continue this evolution of not just being a staffing partner, but a holistic workforce solutions partner," Salka said.
"Our growth strategy is to help clients to be more efficient and effective in managing their entire clinical workforce, both permanent and temporary," said Salka. "It's all about getting the right talent at the right time at the right cost."
“The good news we saw greater than expected performance across all of our businesses. Nursing, allied, physician and perm placement. And I think it is combination of the market itself being extremely robust and accelerating through the quarter which was a bit of surprise to us especially considering last year, remember it actually decelerated a bit. And on top of that really the caliber and quality of our winning team. We have incredible leaders and team members even now we've added more to that recently. We also have the benefit of a lot of experienced in 10 years individuals who know what it take to perform well in this kind of market. And so I think they were able to convert that market opportunity very quickly.”
“The last report they show job openings are up 25% year-over-year within healthcare and the number of quits of about 19%. And I wouldn't be surprised if it is gone up since then based what were anecdotally hearing from our clients and what's driving demand for not only the temporary staffing services but also the demand for our recruitment process outsourcing services. We've seen tremendous increase in the appetite for assistance in permanent placement. So I have to say that, that's got to be a big driver as those clients think about how they are going to address those permanent recruitment challenges not just in a short term but on a longer term basis.”
“We are near historically high demand level across all businesses. And the macro drivers appear unlikely to change in the near term. The US economy continues to show stability particularly from an employment standpoint. Hospitals and ambulatory care providers are experiencing increased volumes due to the aging population and millions of newly insured patients. The clinician shortages are becoming more severe particularly as more of them reach retirement age. With the returns to a supply constrained market place, AMN is very focused on increasing our recruitment capability.”
So I’m not gonna be a sucka…I’m gonna listen to Salka and watch my bank account get healthy with this latest stock pick. I am HUGE!
$$$MR. MARKET$$$
www.mrmarketishuge.com
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