When I volunteered in the neurosurgery unit at Georgetown University Hospital in Washington, D.C., I realized that the overwhelming majority of the nurses on the floor were not employees of the hospital. Instead, they came from placement agencies; some were traveling nurses coming from cities such as Atlanta. Aside from the exceptional wages and benefits that they received, these nurses had a great deal of flexibility and leverage not only with their respective placement agencies, but also with the hospital. You can only work three days a week? No problem. Need to work 70 hours this week to pay down a mounting Visa bill? Knock yourself out.
I guess the circumstances didn't really surprise me, given the emerging shortage of nurses in the United States relative to a relentless demand. I'm also not too surprised that a company such as AMN Healthcare Services (NYSE:AHS) is bringing in the coin hand-over-fist. The company engages in the recruitment and placement of physicians, nurses, and allied health professionals on a temporary or permanent basis at hospitals and other health care facilities in the U.S. and internationally. It is presently the largest health-care staffing firm in the nation.
In early August, the firm reported a 63% increase in revenue for its second quarter. Quarterly revenue came in at $261.2 million versus $160.7 million in the year-ago quarter. The company's profit surged to $7.3 million, or $0.21 per share, for a 65% rise from its $4.4 million, or $0.14 per share, 2005 second quarter. The earnings also prompted AMN to revise its full-year earnings guidance up to a range of $0.86-$0.89 per share from previous guidance indicating $0.78-$0.82 per share. The company noted that the increase in revenue compared to the same quarter last year was due primarily to the company's acquisition of The MHA Group in November 2005 and growth in the company's nurse and allied health care staffing business. Shareholders are eagerly awaiting the company's third-quarter results, which are due to be released Nov. 2.
While the stock has risen 60% from a year ago, there are multiple reasons why it may be only in the early stages of a prolonged ascent. It serves as the facilitator in an industry where the demand for the candidates it places is seemingly limitless. The company has not grown complacent with its recent success. It has committed to increase spending for the marketing of its brand and for an increased recruiting effort to attract new nurse candidates.
Not only does the company trade at a modest, forward P/E of 22, but its astounding year-over-year quarterly revenue growth of 63% makes it a more attractive long-term investment option when compared to competitors Cross Country Healthcare (NASDAQ:CCRN) and Medical Staffing Network Holdings (NYSE:MRN), which both have experienced year-over-year quarterly revenue declines.
Before purchasing shares of this stock, Fools definitely should take into account the stock's recent run-up in price as an indication that AMN may be trading near its fair value. Nevertheless, if the company's third-quarter earnings top analysts' estimates next month as they did in the second quarter; we very well could see future long-term growth from this small-cap outperformer.
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Fool contributor Billy Fisher does not own shares of any of the companies mentioned.
