Encompass Health (EHC)
NYSE:EHC
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Encompass Health
(NYSE:EHC)
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Rating:70Outperform
Price Target:
$119.00
▲(10.96% Upside)
Action:ReiteratedDate: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.
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.
Read all positive and negative factors
Positive Factors
Negative 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.
Read all positive factors
Encompass Health (EHC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$10.66B
Dividend Yield0.65%
Average Volume (3M)940.62K
Price to Earnings (P/E)18.8
Beta (1Y)0.62
Revenue Growth11.13%
EPS Growth27.53%
CountryUS
Employees28,572
SectorHealthcare
Sector Strength45
IndustryMedical - Care Facilities
Share Statistics
EPS (TTM)1.46
Shares Outstanding99,416,160
10 Day Avg. Volume970,715
30 Day Avg. Volume940,621
Financial Highlights & Ratios
PEG Ratio0.78
Price to Book (P/B)4.37
Price to Sales (P/S)1.80
P/FCF Ratio24.29
Enterprise Value/Market Cap1.26
Enterprise Value/Revenue2.26
Enterprise Value/Gross Profit5.82
Enterprise Value/Ebitda9.54
Forecast
1Y Price Target
$146.40Price Target Upside36.50% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering6
EPS Forecast (FY)5.92
Revenue Forecast (FY)$6.42B
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 segm...
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, Me...
Encompass Health Key Performance Indicators (KPIs)
Any
Number of Hospitals
Indicates the scale and reach of the company's healthcare network, which can impact patient access, market presence, and potential for revenue growth.
Indicates the scale and reach of the company's healthcare network, which can impact patient access, market presence, and potential for revenue growth.
Data provided by:
The Fly
The FlyEncompass Health Earnings Call Summary
Earnings Call Date:Feb 05, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 30, 2026
Earnings Call Sentiment Positive
The call conveyed strong operational and financial performance—robust revenue and EBITDA growth, record free cash flow, improved labor metrics, quality outcomes above industry averages and active capital deployment—offset by targeted payer and regulatory challenges (notably a meaningful MA conversion decline with a specific national plan, RCD adjudication efforts in select markets, and some unit consolidations). Management presented clear mitigation actions (appeals strategy, Palmetir analytics, small-format hospital strategy) and provided constructive 2026 guidance, so positives materially outweigh negatives.Positive Updates
Strong Revenue and EBITDA Growth
Full-year 2025 revenue increased 10.5%; Q4 revenue rose 9.9% to $1.5B. Full-year adjusted EBITDA grew 14.9%, and Q4 adjusted EBITDA increased 15.9% to $335.6M.
Negative Updates
Medicare Advantage Conversion Challenges
A major national Medicare Advantage payer experienced a significant drop in conversion rate in Q4 (management cited roughly a 500 bps decline for that payer), reducing admits despite referrals rising; MA conversion historically ~25–30% versus FFS mid-60s, prompting a new admit-and-appeal strategy and potential escalation to CMS.
Read all updates
Q4-2025 Updates
Positive
Negative
Strong Revenue and EBITDA Growth
Full-year 2025 revenue increased 10.5%; Q4 revenue rose 9.9% to $1.5B. Full-year adjusted EBITDA grew 14.9%, and Q4 adjusted EBITDA increased 15.9% to $335.6M.
Read all positive updates
Company Guidance
Management's 2026 guidance calls for net operating revenue of $6.365–$6.465 billion, adjusted EBITDA of $1.34–$1.38 billion and adjusted EPS of $5.81–$6.10, with an assumed bad‑debt rate of roughly 2.0–2.5%; they emphasized a strong balance sheet (year‑end 2025 net financial leverage 1.9x, implied ~1.83x at the 2026 midpoint), continued robust cash generation (2025 adjusted free cash flow $818M, 2026 midpoint modeled near $828M), the capacity to fund roughly $725M of growth capex (2025 capex was $736M) while supporting $158M of share repurchases and just over $70M of cash dividends.Encompass Health Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
86
Very Positive
Cash Flow
28
Negative
| 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
Positive
107.25
Price Trends
102.97
Positive
104.93
Positive
112.12
Negative
Market Momentum
0.82
Negative
63.70
Neutral
87.67
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EHC, the sentiment is Positive. The current price of 107.25 is above the 20-day moving average (MA) of 100.28, above the 50-day MA of 102.97, and below the 200-day MA of 112.12, indicating a neutral trend. The MACD of 0.82 indicates Negative momentum. The RSI at 63.70 is Neutral, neither overbought nor oversold. The STOCH value of 87.67 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for EHC.
Encompass Health Risk Analysis
Encompass Health disclosed 31 risk factors in its most recent earnings report. Encompass Health reported the most risks in the "Legal & Regulatory" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Encompass Health Peers Comparison
UnderperformOutperform
Sector (51)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $11.57B | 29.02 | 16.58% | 0.14% | 18.61% | 35.76% | |
70 Outperform | $11.04B | 9.31 | 21.03% | 0.35% | 10.21% | 39.58% | |
70 Outperform | $10.66B | 18.84 | 24.48% | 0.65% | 11.13% | 27.53% | |
63 Neutral | $10.02B | 10.44 | -160.63% | ― | 5.14% | 4.37% | |
62 Neutral | $16.98B | 12.83 | 34.82% | ― | -0.56% | -53.50% | |
60 Neutral | $13.64B | 12.07 | 7.13% | 3.29% | 4.09% | 13.17% | |
51 Neutral | $7.86B | -0.30 | -43.30% | 2.27% | 22.53% | -2.21% |
* Healthcare Sector Average
EHC
Encompass Health
107.25
5.76
5.67%
DVA
DaVita
150.05
-5.46
-3.51%
FMS
Fresenius Medical Care
23.63
0.10
0.42%
THC
Tenet Healthcare
195.24
71.45
57.72%
ENSG
The Ensign Group
199.02
71.25
55.76%
UHS
Universal Health
180.78
6.06
3.47%
Encompass Health Corporate Events
Business Operations and StrategyPrivate Placements and Financing
Encompass Health Secures New $1 Billion Credit Facility
Positive
Mar 11, 2026
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 maturit...
Business Operations and StrategyFinancial Disclosures
Encompass Health posts strong Q4 results and upbeat outlook
Positive
Feb 5, 2026
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 ...
Business Operations and StrategyExecutive/Board Changes
Encompass Health Appoints Cain Hayes to Board
Positive
Feb 2, 2026
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...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.