AMN Healthcare Services currently trades at $20.73 per share and has shown little upside over the past six months, posting a middling return of 2.8%. The stock also fell short of the S&P 500’s 23.9% gain during that period.
Is now the time to buy AMN Healthcare Services, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free for active Edge members.
Why Do We Think AMN Healthcare Services Will Underperform?
We're sitting this one out for now. Here are three reasons why AMN doesn't excite us and a 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 8,700 in the latest quarter, and they averaged 21.5% 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
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for AMN Healthcare Services, its EPS declined by 8.4% annually over the last five years while its revenue grew by 3.2%. 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
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, AMN Healthcare Services’s ROIC has decreased significantly over the last few years. 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 doesn’t pass our quality test. With its shares lagging the market recently, the stock trades at 23.6× forward P/E (or $20.73 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. We’d suggest looking at one of our top digital advertising picks.
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