Encompass Health (EHC) AI Stock Analysis

• Market Cap: $10.55B
• Dividend Yield: 0.65%
• Average Volume (3M): 1.43M
• Price to Earnings (P/E): 19.2
• Beta (1Y): 0.56
• 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: 100,615,974
• 10 Day Avg. Volume: 1,454,938
• 30 Day Avg. Volume: 1,427,451
• PEG Ratio: 0.78
• Price to Book (P/B): 3.32
• Price to Sales (P/S): 1.80
• P/FCF Ratio: 24.29
• Enterprise Value/Market Cap: 1.02
• Enterprise Value/Revenue: 1.81
• Enterprise Value/Gross Profit: 4.67
• Enterprise Value/Ebitda: 7.68
• 1Y Price Target: $146.75
• Price Target Upside: 39.98% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 5
• EPS Forecast (FY): 5.82
• Revenue Forecast (FY): $6.45B

• Rating: 73 Outperform
• Price Target: $118.00 ▲(12.55% Upside)
• Action: Upgraded Date: 02/09/26
• Date: Action: Upgraded 02/09/26

The score is driven primarily by strong earnings-call guidance and operational momentum alongside a meaningfully improved balance sheet, partially offset by the provided financial-statement cash flow weakness and mixed technical signals. Valuation appears reasonable but the low dividend yield limits support.

Positive Factors

Network Expansion & Scale

Meaningful capacity additions (517 beds, eight new hospitals) expand market coverage and referral capture, reinforcing Encompass Health’s hub-and-spoke strategy. Scale improves negotiating leverage with payers, spreads fixed costs across more volumes, and supports multi-year organic growth tied to demographic demand.

Superior Clinical Outcomes

Consistently strong outcomes and patient satisfaction above industry averages create lasting competitive advantage: they drive physician referrals, payer confidence, and higher occupancy. Superior quality supports pricing power, lower readmission risks, and durable demand from aging populations and complex case mixes.

Material Balance-Sheet Improvement

A sharp reduction in leverage materially lowers financial risk and increases strategic flexibility to fund capex, M&A or shareholder returns. Strong equity base and solid ROE provide resilience against reimbursement cycles and enable sustained capital deployment without over-reliance on external financing.

Negative Factors

2025 Cash-Flow Deterioration

A sudden reversal to negative operating and free cash flow in 2025 breaks a prior multi-year positive cash generation trend, creating near-term funding and execution risk. If persistent, weaker cash flow could constrain capex, share repurchases or force higher reliance on financing, reducing strategic optionality.

Medicare Advantage Conversion Risk

Material declines in MA conversion, concentrated with specific large payers, threaten admissions and revenue stability. This payer-specific exposure requires sustained appeals, legal and contract work and could materially reduce volumes in affected markets, creating persistent operational and reimbursement risk.

Regulatory/Review Uncertainty

Expansion of RCD activity and the TEAM pilot increases audit and reimbursement uncertainty across states. Heightened review requires ongoing resource allocation for appeals and compliance, raising the risk of slower cash collections, payment recoveries, and margin pressure over a multi-quarter to multi-year horizon.

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 generates revenue primarily through its inpatient rehabilitation hospitals, home health services, and hospice care. The company is reimbursed by Medicare and Medicaid for a significant portion of its services, with payment models based on diagnosis-related groups (DRGs) for inpatient care. Additionally, EHC earns revenue from private insurance payers and out-of-pocket payments from patients. The company's financial performance is bolstered by strategic partnerships with healthcare providers, payers, and community organizations that facilitate patient referrals and enhance service offerings. The growing demand for post-acute care services, driven by an aging population and increasing prevalence of chronic conditions, also contributes to EHC's revenue growth.

Encompass Health Financial Statement Overview

Summary

Profitability and revenue trends are solid and the balance sheet strengthened materially (very low debt-to-equity and solid ROE), but the provided cash flow analysis is a major offset due to a sharp 2025 reversal to negative operating and free cash flow, increasing near-term funding/execution risk.

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	1.38B	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	72.20M	85.40M	141.80M	21.80M	49.40M
Total Debt	266.70M	2.71B	2.93B	2.99B	3.48B
Total Liabilities	3.81B	3.69B	3.81B	3.77B	4.47B
Stockholders Equity	3.22B	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: 104.84
• 50DMA: Positive
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Positive

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 104.84 is above the 20-day moving average (MA) of 103.12, above the 50-day MA of 103.97, and below the 200-day MA of 114.99, indicating a neutral trend. The MACD of 1.41 indicates Negative momentum. The RSI at 50.19 is Neutral, neither overbought nor oversold. The STOCH value of 13.76 is Positive, 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
UHS	76 Outperform	$14.37B	11.05	19.97%	0.35%	10.21%	39.58%
ENSG	74 Outperform	$12.20B	35.94	16.91%	0.14%	18.61%	35.76%
EHC	73 Outperform	$10.55B	19.16	25.13%	0.65%	11.13%	27.53%
THC	69 Neutral	$20.66B	15.34	33.54%	―	-0.56%	-53.50%
FMS	65 Neutral	$13.10B	17.85	5.31%	3.29%	4.09%	13.17%
DVA	63 Neutral	$10.08B	15.79	―	―	5.14%	4.37%
Sector *	51 Neutral	$7.86B	-0.30	-43.30%	2.27%	22.53%	-2.21%

Encompass Health Corporate Events

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.

Encompass Health Updates 2025 Financial Guidance Approach

Encompass Health has announced that it does not provide guidance on a GAAP basis for certain financial measures due to the unpredictable nature of items outside the company’s control, such as legal settlements and restructuring costs. The company has, however, provided estimable GAAP measures for 2025, including interest expenses and amortization of debt-related items, which will be included in a reconciliation for Adjusted EBITDA.

The most recent analyst rating on (EHC) stock is a Hold with a $124.00 price target. To see the full list of analyst forecasts on Encompass Health stock, see the EHC Stock Forecast page.