AMN Healthcare Services (AMN)

Healthcare staffing company AMN Healthcare Services (NYSE:AMN) reported Q1 CY2025 results topping the market’s revenue expectations, but sales fell by 16% year on year to $689.5 million. The company expects next quarter’s revenue to be around $652.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.45 per share was significantly above analysts’ consensus estimates.

Company Overview

With a network of thousands of healthcare professionals ranging from nurses to physicians to executives, AMN Healthcare (NYSE:AMN) provides healthcare workforce solutions including temporary staffing, permanent placement, and technology platforms for hospitals and healthcare facilities across the United States.

The skilled nursing services industry provides specialized care for patients requiring medical or rehabilitative support after hospital stays or for chronic conditions. These companies benefit from stable demand driven by an aging population and recurring revenue from Medicare, Medicaid, and private insurance. However, the industry faces challenges such as thin margins due to high labor costs and stringent regulatory requirements. Looking ahead, the industry is supported by tailwinds from an aging population, which means higher chronic disease prevalence. Advances in medical technology, including using AI to better predict, diagnose, and treat illnesses, may reduce hospital readmissions and improve outcomes. However, headwinds such as labor shortages, wage inflation, and potential government reimbursement cuts pose challenges. Adapting to value-based care models may further squeeze margins by requiring investments in training, technology, and compliance.

AMN Healthcare's main competitors include Cross Country Healthcare (NASDAQ: CCRN), CHG Healthcare Services, Aya Healthcare, HealthTrust Workforce Solutions, and Ingenovis Health. In the language services segment, it competes with LanguageLine Solutions.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $2.85 billion in revenue over the past 12 months, AMN Healthcare Services has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, AMN Healthcare Services’s sales grew at a mediocre 4.5% compounded annual growth rate over the last five years. This fell short of our benchmark for the healthcare sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. AMN Healthcare Services’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 23% annually.

We can dig further into the company’s revenue dynamics by analyzing its number of travelers on assignment, which reached 8,981 in the latest quarter. Over the last two years, AMN Healthcare Services’s travelers on assignment averaged 21.7% year-on-year declines. Because this number is in line with its revenue growth, we can see the company kept its prices fairly consistent.

This quarter, AMN Healthcare Services’s revenue fell by 16% year on year to $689.5 million but beat Wall Street’s estimates by 2.9%. Company management is currently guiding for a 11.9% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 7.6% over the next 12 months. Although this projection is better than its two-year trend, it's tough to feel optimistic about a company facing demand difficulties.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

AMN Healthcare Services was profitable over the last five years but held back by its large cost base. Its average operating margin of 8% was weak for a healthcare business.

Analyzing the trend in its profitability, AMN Healthcare Services’s operating margin decreased by 12.7 percentage points over the last five years. This performance was caused by more recent speed bumps as the company’s margin fell by 16.3 percentage points on a two-year basis. We’re disappointed in these results because it shows its expenses were rising and it couldn’t pass those costs onto its customers.

This quarter, AMN Healthcare Services generated an operating profit margin of 1.8%, down 3.1 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for AMN Healthcare Services, its EPS declined by 2.8% annually over the last five years while its revenue grew by 4.5%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

Diving into the nuances of AMN Healthcare Services’s earnings can give us a better understanding of its performance. As we mentioned earlier, AMN Healthcare Services’s operating margin declined by 12.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q1, AMN Healthcare Services reported EPS at $0.45, down from $0.97 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects AMN Healthcare Services’s full-year EPS of $2.79 to shrink by 56.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

AMN Healthcare Services has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 8.7% over the last five years, slightly better than the broader healthcare sector.

Taking a step back, we can see that AMN Healthcare Services’s margin expanded by 1.6 percentage points during that time. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

AMN Healthcare Services’s free cash flow clocked in at $92.67 million in Q1, equivalent to a 13.4% margin. This result was good as its margin was 5.7 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

AMN Healthcare Services’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 10.4%, slightly better than typical healthcare business.

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. 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.

AMN Healthcare Services reported $55.78 million of cash and $996.2 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $307.3 million of EBITDA over the last 12 months, we view AMN Healthcare Services’s 3.1× net-debt-to-EBITDA ratio as safe. We also see its $40.95 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly AMN Healthcare Services blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. Zooming out, we think this quarter featured some important positives. The stock traded up 12.3% to $22.80 immediately after reporting.

Updated: May 10, 2025 at 11:29 PM EDT

Before investing in or passing on AMN Healthcare Services, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

We cheer for all companies serving everyday consumers, but in the case of AMN Healthcare Services, we’ll be cheering from the sidelines. For starters, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its rising cash profitability gives it more optionality, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its travelers on assignment declined.

AMN Healthcare Services’s P/E ratio based on the next 12 months is 18.1x. This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $27.29 on the company (compared to the current share price of $22).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

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