The past six months have been a windfall for AMN Healthcare Services’s shareholders. The company’s stock price has jumped 59.3%, hitting $33.44 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now the time to buy AMN Healthcare Services, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is AMN Healthcare Services Not Exciting?
We’re happy investors have made money, but we’re sitting this one out for now. Here are three reasons we avoid AMN, plus one stock we’d rather own.
1. Demand Slips as Sales Volumes Slide
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Specialized Medical & Nursing Services company because there’s a ceiling to what customers will pay.
AMN Healthcare Services’s travelers on assignment came in at 9,194 in the latest quarter, and they averaged 8.6% year-on-year declines over the last two years. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests AMN Healthcare Services might have to lower prices or invest in product improvements to grow, factors that can hinder near-term profitability. 
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for AMN Healthcare Services, its EPS declined by 7.6% annually over the last five years while its revenue grew by 3.3%. This tells us the company became less profitable on a per-share basis as it expanded.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Over the last few years, AMN Healthcare Services’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.
Final Judgment
AMN Healthcare Services’s business quality ultimately falls short of our standards. Following the recent surge, the stock trades at 39.6× forward P/E (or $33.44 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d recommend looking at the Amazon and PayPal of Latin America.
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