What happened

AMN Healthcare Services (NYSE:AMN), the market leader in healthcare staffing and workforce solutions, is having a historically bad day today. Specifically, the company's shares fell by as much as 21.5% in early-morning trading on heavy volume.

What's driving this sizable move lower? AMN's shares are tanking in response to its fourth-quarter and full-year results, released after the bell yesterday. The big-ticket item is that the company missed Wall Street's consensus estimate on revenue for the quarter by $10.47 million.

A holographic image of a human being being projected from a tablet held by a doctor

Image source: Getty Images.

So what

AMN's management placed the blame for this quarterly revenue miss squarely on the shoulders of its Locum Tenens segment. This staffing segment has been struggling for the past year due to new entrants into the space. As a result, Locum's quarterly sales fell by a whopping 24% in the fourth quarter compared to the same period a year ago. The company plans to address this underlying weakness by hiring additional sales staff for the Locum team and streamlining the business model.

Check out the latest AMN earnings call transcript.

Now what

Is this eye-popping sell-off warranted? On the one hand, AMN still has a fundamentally strong business -- evinced by its positive free cash flow of $227 million last year. Moreover, the company's shares are now trading at a rock bottom price-to-sales ratio of 1.2 following today's drop-off.

However, the market clearly isn't convinced that AMN can address Locum's core problems -- despite management's comments to the contrary. As such, this top healthcare-staffing services stock may have trouble mounting a comeback until this weak spot has been definitively addressed.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.