Encompass Health (EHC) AI Stock Analysis

• Market Cap: $10.08B
• Dividend Yield: 0.65%
• Average Volume (3M): 1.31M
• Price to Earnings (P/E): 18.8
• Beta (1Y): 0.58
• Revenue Growth: 11.13%
• EPS Growth: 27.53%
• Country: US
• Employees: 28,572
• Sector: Healthcare
• Sector Strength: 45
• Industry: Medical - Care Facilities
• EPS (TTM): 1.46
• Shares Outstanding: 99,416,160
• 10 Day Avg. Volume: 955,332
• 30 Day Avg. Volume: 1,312,975
• PEG Ratio: 0.78
• Price to Book (P/B): 4.37
• Price to Sales (P/S): 1.80
• P/FCF Ratio: 24.29
• Enterprise Value/Market Cap: 1.27
• Enterprise Value/Revenue: 2.16
• Enterprise Value/Gross Profit: 5.57
• Enterprise Value/Ebitda: 9.14
• 1Y Price Target: $146.75
• Price Target Upside: 44.68% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 6
• EPS Forecast (FY): 5.82
• Revenue Forecast (FY): $6.43B

• Rating: 70 Outperform
• Price Target: $119.00 ▲(17.32% Upside)
• Action: Reiterated Date: 03/11/26
• Date: Action: Reiterated 03/11/26

The score is driven primarily by solid profitability and a materially improved balance sheet, plus an upbeat earnings call with constructive 2026 guidance. Offsetting these positives are the sharp deterioration in reported cash flow in 2025 and only mixed technicals (below longer-term moving averages).

Positive Factors

Balance sheet deleveraging

A materially lower debt-to-equity ratio provides durable financial flexibility: it reduces interest and covenant pressure, supports funding of growth capex and share repurchases, and improves resilience to payer or reimbursement shocks over the next several quarters.

Consistent revenue and margin expansion

Sustained top-line growth and rising net margin signal enduring demand for inpatient rehab and improved mix or pricing. This trend supports persistent operating leverage, stronger retained earnings, and better capacity to fund investments and shareholder returns over multiple quarters.

Operational quality and labor progress

Above-industry outcomes and lower premium labor usage strengthen referral appeal and reduce variable cost pressure. Better clinical results and workforce stability are structural advantages that sustain margins, referral volumes, and negotiating leverage with payors over the medium term.

Negative Factors

Reported cash-flow deterioration in 2025

A sudden deterioration in reported operating and free cash flow undermines durable cash-generation credibility. Even with adjusted metrics and guidance, weaker reported cash flow increases funding and execution risk, may pressure liquidity or capital allocation, and warrants monitoring of cash recovery.

Medicare Advantage conversion / payer concentration risk

Sharp, payer-specific drops in MA conversion reduce admissions despite rising referrals and reveal concentration exposure. Sustained conversion gaps versus FFS require operational appeals, contract renegotiation or regulatory escalation and can structurally depress volumes and revenue per discharge.

Ongoing regulatory and audit uncertainty

New pilot programs and RCD expansion raise the risk of altered reimbursement, higher denials and greater administrative costs. Persistent regulatory shifts can change payment timing or eligibility, forcing sustained appeals spend and operational adjustments that pressure margins and resource allocation.

Encompass Health Business Overview & Revenue Model

Company Description

Encompass Health Corporation provides facility-based and home-based post-acute healthcare services in the United States. The company operates in two segments, Inpatient Rehabilitation, and Home Health and Hospice. The Inpatient Rehabilitation segment provides specialized rehabilitative treatment on an inpatient and outpatient basis to patients who are recovering from conditions, such as stroke and other neurological disorders, cardiac and pulmonary conditions, brain and spinal cord injuries, complex orthopedic conditions, and amputations. The Home Health and Hospice segment provides home health and hospice services primarily in the Southeast and Texas. Its home health services include a range of Medicare-certified home nursing services to adult patients in need of care comprising skilled nursing, medical social work, and home health aide services, as well as physical, occupational, speech therapy, and others. This segment's hospice services comprise in-home services to terminally ill patients and their families. As of June 1, 2022, it operated 149 hospitals, 252 home health locations, and 99 hospice locations in 42 states and Puerto Rico. The company was formerly known as HealthSouth Corporation and changed its name to Encompass Health Corporation in January 2018. Encompass Health Corporation was founded in 1983 and is based in Birmingham, Alabama.

How the Company Makes Money

Encompass Health primarily makes money by providing inpatient rehabilitation services and receiving reimbursement for patient stays. Revenue is generated largely from payments by third-party payors, including Medicare, Medicare Advantage plans, Medicaid, and commercial managed-care insurers, as well as payments from patients (e.g., deductibles and co-insurance). The company’s core revenue stream is patient service revenue tied to admissions, length of stay, case mix (patient acuity and diagnosis), and negotiated or regulated reimbursement rates. A key driver of earnings is the volume of patients referred for inpatient rehabilitation and the reimbursement terms associated with those payors. Medicare reimbursement is commonly determined under the Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS), which bases payment on patient characteristics and case classification rather than itemized billing; managed-care and commercial contracts may use per-case, per-diem, or other negotiated payment structures (specific contract terms vary and are not publicly itemized). Encompass Health also benefits from hospital operations scale—operating many facilities allows the company to spread fixed costs (facility, staffing, administrative functions) and optimize occupancy and staffing efficiency, which influences margins. In addition, the company historically expanded its footprint through a combination of wholly owned hospitals and joint venture arrangements with acute-care health systems, where partners contribute local market access and referral relationships while Encompass provides rehabilitation operating expertise; however, the company does not publicly disclose a complete, current list of all joint venture partners in a single standardized source, so specific partner names and terms are null.

Encompass Health Financial Statement Overview

Summary

Profitability and revenue trends are solid and the balance sheet strengthened materially (very low debt-to-equity and strong ROE), but cash flow quality is a key risk because 2025 operating and free cash flow turned sharply negative versus prior years.

Income Statement

Revenue has grown steadily from 2021–2025 (with 2025 showing strong reported growth), and profitability has generally improved, with net profit margin rising to ~9.5% in 2025 from ~6.2% in 2022. Gross margin also expanded meaningfully in 2025. Offsetting this, operating profitability trends are less consistent (2025 operating margin appears anomalous versus prior years), and margins have shown some year-to-year volatility.

Balance Sheet

Leverage improved dramatically in 2025, with debt-to-equity dropping to ~0.08 from ~1.3–2.3 in prior years, materially strengthening balance-sheet risk. Equity has also expanded, and returns on equity remain solid (~18% in 2025; ~21–22% in 2022–2024). The main weakness is that the sharp debt reduction year-over-year is unusually large and may not be sustainable or may reflect one-time actions, making trend durability a key watch item.

Cash Flow

Cash generation deteriorated sharply in 2025: operating cash flow was slightly negative and free cash flow fell deeply negative, a major break from 2022–2024 when operating cash flow was strong and free cash flow was positive. This introduces near-term funding and execution risk, even though the prior multi-year history suggests the business can produce healthy cash flow under more normal conditions.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	5.94B	5.37B	4.80B	4.35B	4.01B
Gross Profit	1.29B	2.23B	1.98B	1.75B	1.70B
EBITDA	1.40B	1.19B	1.01B	870.10M	888.90M
Net Income	566.20M	455.70M	352.00M	271.00M	412.20M
Balance Sheet
Total Assets	7.09B	6.53B	6.10B	5.64B	6.86B
Cash, Cash Equivalents and Short-Term Investments	145.10M	85.40M	141.80M	21.80M	49.40M
Total Debt	2.71B	2.71B	2.93B	2.99B	3.48B
Total Liabilities	3.81B	3.69B	3.81B	3.77B	4.47B
Stockholders Equity	2.44B	2.07B	1.65B	1.31B	1.91B
Cash Flow
Free Cash Flow	439.20M	360.30M	267.70M	121.70M	164.60M
Operating Cash Flow	1.18B	1.00B	850.80M	705.80M	715.80M
Investing Cash Flow	-762.80M	-653.30M	-602.80M	-627.00M	-666.30M
Financing Cash Flow	-433.00M	-330.60M	-197.20M	-145.70M	-240.10M

Encompass Health Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 101.43
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EHC, the sentiment is Negative. The current price of 101.43 is below the 20-day moving average (MA) of 105.72, below the 50-day MA of 103.45, and below the 200-day MA of 114.00, indicating a bearish trend. The MACD of -0.85 indicates Positive momentum. The RSI at 40.87 is Neutral, neither overbought nor oversold. The STOCH value of 21.12 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for EHC.

Encompass Health Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ENSG	74 Outperform	$12.17B	29.02	16.58%	0.14%	18.61%	35.76%
EHC	70 Outperform	$10.08B	18.84	24.48%	0.65%	11.13%	27.53%
THC	69 Neutral	$19.07B	12.83	34.82%	―	-0.56%	-53.50%
UHS	66 Neutral	$11.82B	9.31	21.03%	0.35%	10.21%	39.58%
DVA	63 Neutral	$9.90B	10.44	-160.63%	―	5.14%	4.37%
FMS	60 Neutral	$13.33B	12.07	7.13%	3.29%	4.09%	13.17%
Sector *	51 Neutral	$7.86B	-0.30	-43.30%	2.27%	22.53%	-2.21%

Encompass Health Corporate Events

Encompass Health Secures New $1 Billion Credit Facility

On March 9, 2026, Encompass Health entered into a new $1 billion revolving credit agreement with Truist Bank and other lenders, replacing and fully repaying its prior 2022 facility led by Barclays. The new 2026 Credit Agreement extends the maturity to March 9, 2031, lowers the undrawn commitment fee, relaxes certain covenants on investments, debt, liens and restricted payments, removes a 0.10% SOFR interest adjustment, and increases the swingline sublimit to $40 million.

The facility includes a $260 million letter of credit subfacility, an accordion feature that allows substantial incremental term loans or increased revolver capacity subject to leverage tests, and covenants requiring minimum interest coverage of 3.00x and a maximum leverage ratio of 4.50x outside significant acquisitions. As of March 9, 2026, the company had drawn $250 million on the revolver and $53.6 million on the letter of credit subfacility to retire the old credit agreement, and concurrently replaced its Barclays collateral and guarantee arrangements with a new collateral and guarantee agreement under Truist on similar terms, reinforcing its secured financing structure and balance-sheet flexibility.

The most recent analyst rating on (EHC) stock is a Buy with a $118.00 price target. To see the full list of analyst forecasts on Encompass Health stock, see the EHC Stock Forecast page.

Encompass Health posts strong Q4 results and upbeat outlook

On February 5, 2026, Encompass Health reported strong results for the fourth quarter ended December 31, 2025, with net operating revenue up 9.9% year-on-year to $1.54 billion and diluted income from continuing operations per share rising 20.3% to $1.42. Adjusted earnings per share increased 24.8% to $1.46, while Adjusted EBITDA grew 15.9% to $335.6 million, supported by a 5.3% increase in discharges, higher net patient revenue per discharge, and improved cash generation, including a 24.1% rise in operating cash flow and 23.6% growth in adjusted free cash flow. For full-year 2025, management highlighted revenue growth of 10.5% and a 14.9% increase in Adjusted EBITDA, underpinned by capacity expansion of 517 inpatient rehabilitation beds through eight new hospitals and bed additions at existing sites, reinforcing the company’s position to capture rising demand from an aging U.S. population. Looking ahead, the company issued 2026 guidance calling for net operating revenue of $6.37 billion to $6.47 billion, Adjusted EBITDA of $1.34 billion to $1.38 billion and adjusted earnings per share of $5.81 to $6.10, signaling continued growth expectations and underscoring the importance of non-GAAP metrics such as Adjusted EBITDA and adjusted free cash flow in assessing its leverage, liquidity and ability to fund expansion and shareholder returns.

The most recent analyst rating on (EHC) stock is a Hold with a $101.00 price target. To see the full list of analyst forecasts on Encompass Health stock, see the EHC Stock Forecast page.

Encompass Health Appoints Cain Hayes to Board

On January 30, 2026, Encompass Health’s board of directors elected Cain A. Hayes as an independent director, formalized in a press announcement on February 2, 2026. Hayes, the former president and CEO of Point32Health and Gateway Health Plan with a long executive track record at Aetna and Nationwide, brings deep expertise in healthcare payor operations, strategic leadership, risk management, and regulation. His appointment, part of Encompass Health’s ongoing board succession planning, is aimed at strengthening the board’s payor-focused perspective as the company seeks to maintain its position as the leading U.S. provider of inpatient rehabilitation services in a rapidly evolving healthcare environment, with the company emphasizing his expected contribution to strategic direction and long-term value creation for shareholders.

The most recent analyst rating on (EHC) stock is a Hold with a $104.00 price target. To see the full list of analyst forecasts on Encompass Health stock, see the EHC Stock Forecast page.