Please ensure Javascript is enabled for purposes of website accessibility

Coronavirus 2021: Where to Invest $1,000 Right Now

By Jason Hawthorne - Feb 27, 2021 at 6:50AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This healthcare staffing company is adding technology to its arsenal.

As more signs point to a return to normal by summer, investors need to think about how industries that have been warped by the pandemic over the past year will be affected. Just as vaccinations will lead to more travel, dining out, and live events, they will also mean more people ready to get treatment for other health issues they've been putting off.

A recent study estimated that 1 in 5 Americans delayed seeking healthcare during the pandemic. When those patients return, the influx will require caregivers -- and that's where the country's largest healthcare staffing company, AMN Healthcare Services (AMN 7.09%), shines. The company is a leader in talent solutions for the healthcare industry, and is in the perfect position to staff clinics, operating rooms, and hospital units to meet the demand. And that's not all -- recent technology-centered acquisitions have set it up for growth as the healthcare landscape changes.

A woman wearing a surgical mask at an airport, with a plane taking off behind her

Image source: Getty Images.

Healthcare staffing and beyond

AMN Healthcare is made up of three business segments. The nurse and allied solutions segment offers geographically flexible nurses to fill positions on a non-permanent basis, as well as staff such as occupational and physical therapists; this business unit brings in more than two-thirds of revenue. The second segment is physician and leadership solutions, which places both permanent and short-term doctors and healthcare executives. The third is technology and workforce solutions, which offers software for tasks like scheduling and labor management, vendor management, and physician credentialing.

Business Unit 2020 Revenue Percentage of Revenue
Nurse and allied solutions $1.699 billion 70.9%
Physician and leadership solutions $467 million 19.5%
Technology and workforce solutions $228 million 9.5%

Data source: AMN Healthcare.

Management has added services through acquisition, including a couple of well-timed purchases in virtual health. In 2019, AMN bought Advanced Medical Personnel Services, which provides, among other services, a platform for both on-site and telehealth therapists. In January 2020, AMN purchased Stratus Video, the leading provider of language interpretation services via remote video. Both deals enabled the company to better serve customers during the pandemic.

The effects of the coronavirus in 2020

Nearly all elective procedures were canceled in the spring of 2020, and their frequency slowly returned by the fall and winter. The effects were felt very differently across AMN's three business segments.

Business Unit 2020 Revenue Growth (YOY) Q4 2020 Revenue Growth (YOY)
Nurse and allied solutions 9% 6%
Physician and leadership solutions (17%) (20%)
Technology and workforce solutions 135% 192%

Looking at the fourth-quarter and full-year numbers doesn't tell the story of volatility through the year. The nursing and allied staffing segment whipsawed from 21% growth in the second quarter, led by demand for travel nurses, to a 4% drop in the third quarter. Physician and leadership staffing ran consistently lower throughout the year, as health systems worked to reduce positions not directly related to caring for patients. Thanks to acquisitions, the technology and workforce management unit posted greater than 100% growth throughout the year. Overall, 2020 revenue and earnings grew about 8%. And as patients return, the demand for caregivers is growing.

How management sees 2021 unfolding

In the latest earnings release, the company guided to first-quarter revenue of $800 million to $820 million. That reflects growth of 33% to 36% year over year, driven by a 40% rise in the nursing and allied solutions segment. Demand for nursing hit record levels in the fourth quarter, only to be topped in January, and then again in February.

On top of volume growth, the CFO noted that bill rates for nurses are expected to increase 20% from just the fourth quarter. The positive guidance applied to the other segments, as well. Although the physician and leadership solutions division was hit hard last year, revenue there is expected to stabilize in the first quarter, down only 5% year over year. The contribution from acquisitions is expected to keep the growth rate in the technology unit inflated, at 100%.

After the wave of pent-up demand in the first quarter, business is expected to normalize to a 15% to 20% growth rate for the remainder of the year. That growth will be supported by a continued labor shortage: The pandemic forced many out of the workforce due to early retirement, or to care for children or loved ones. Further exacerbating the shortage, AMN's recent survey shows that 75% of nurses describe themselves as "burned out," and fully one-third plan to make changes to how much they work in the next year.

AMN Healthcare was able to make it through the pandemic, and is becoming a more technology-centered company to adapt to the changing healthcare landscape. As health systems come under more pressure from payers to lower costs, its technology enabling virtual care and its optimization of functions like workforce planning and vendor management should all position AMN Healthcare for growth in the coming years.

The price is nearing its pre-pandemic high, but investors needn't worry -- the market should begin valuing the company's technology-related recurring revenue much higher than the less-predictable staffing segment. When this happens, shareholders should be handsomely rewarded.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AMN Healthcare Services, Inc. Stock Quote
AMN Healthcare Services, Inc.
AMN
$94.38 (7.09%) $6.25

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.