(By Balaseshan) UBS Securities analyst A.J. Rice initiated coverage of AMN Healthcare Services Inc.
) with a "Neutral" rating and $6.50 price target.
With slightly less than $900 million in annual revenue, AMN Healthcare is the largest pure play medical staffing company. The company is the industry leader in nurse and allied travel staffing. AMN also operates the leading nationwide provider of physician staffing.
Following the credit crisis, the pace of retirements among healthcare professionals slowed dramatically, dampening demand for temporary staff. Health care utilization trends have also been surprisingly weak in this recession, ostensibly as people have postponed medical care for financial reasons.
With the population growing and aging, demand for healthcare services and, therefore, health care staffing should continue to grow. Coverage of the 32 million currently uninsured is likely to put pressure on supply, causing people to turn to temporary staffing providers, such as AMN.
AMN' core businesses seem to be stabilizing and gradually starting to improve. However, the company continues to be saddled with a large amount of debt that it took on to fund acquisitions undertaken in the economic downturn.
As a result of its high leverage (by historical standards and relative to its peers), Rice does not expect AMN to quickly be afforded its average five-year historical forward price-to-earnings of 18.0 times. As a result, his price target of $6.50 is based on about 13 times his 2013 EPS estimate.
The brokerage established its 2012 EPS estimate for the provider of healthcare staffing and clinical workforce management solutions of $0.36 and its 2013 estimate of $0.49.
AHS is trading down 1.46% at $6.08 on Wednesday.