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Morningstar | Narrow-Moat AMN Continues to Benefit From Post-2008 Expansion

The United States just set the record for the longest period of expansion in its history, and these favorable conditions benefit staffing companies, especially in uniquely resilient industries like healthcare. We see this in narrow-moat AMN Healthcare, the U.S.’ largest healthcare staffing company, which has averaged 16% top-line growth since 2013. While we are holding on to our fair value estimate, we are diving deeper into the positive dynamics for AMN.

Though staffing companies are susceptible to economic fluctuations, AMN has benefited from its position in the healthcare industry, which has been growing for the past few decades and which we expect to grow faster than GDP for the next decade due to secular tends such as an aging U.S and clinician population. Furthermore, the unemployment data for May highlights that healthcare unemployment is well below the already historically low overall rate, at 2.3% versus 3.4% overall. AMN has used this prime position to solidify its competitive advantage through strategic acquisitions that build out its other workforce solutions segment, which provides a host of technology and data-backed staffing solutions and is much less sensitive to economic fluctuations. Also, as of 2018, over 60% of its core nursing revenue flows through managed service partnerships, which are exclusive, long-term contractual relationships that provide stable revenue streams. Further, AMN has cleaned up its balance sheet, which adds to our confidence that it will be able to better navigate the next recession.

AMN has seen difficulty in its temporary physician staffing segment, and we are pessimistic about a turnaround. Nonetheless, we’re not concerned as this segment is AMN’s smallest and remains low margin. Overall, we think AMN has learned from the last recession and is focused on its high-margin nurse staffing segment and reducing exposure to economic fluctuations through its managed service relationships and technological solutions suite.