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Encompass Health (EHC)
NYSE:EHC
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Encompass Health (EHC) AI Stock Analysis

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EHC

Encompass Health

(NYSE:EHC)

Rating:65Neutral
Price Target:
$115.00
▲(7.31%Upside)
Encompass Health's overall stock score of 65 is driven by strong financial performance and positive earnings call sentiment, indicating growth potential and operational efficiency. However, technical analysis reveals bearish signals, and valuation metrics suggest the stock may be relatively expensive. The company's strategic expansion and improved cash flow contribute positively to the outlook, but market momentum remains a concern.
Positive Factors
Financial Performance
Shares traded up 12% after Encompass reported a clean beat-and-raise first quarter, including revenue of $1.455 billion, 2% above consensus, and adjusted EBITDA of $314 million, which exceeded expectations by nearly 8%.
Market Position
Encompass Health is largely insulated from upcoming reimbursement and policy changes affecting the hospital industry.
Strategic Partnerships
Acute hospitals continue to pursue partnerships with Encompass Health.
Negative Factors
Media Influence
The market seems to assume that more negative articles could follow, similar to what has been seen hitting behavioral health providers.
Policy Uncertainty
Uncertainty remains about potential cuts to Medicare Advantage, which could affect future spending and benefits.
Stock Valuation
Stock pressure was more a reflection of Encompass Health’s high multiple and all-time high levels.

Encompass Health (EHC) vs. SPDR S&P 500 ETF (SPY)

Encompass Health Business Overview & Revenue Model

Company DescriptionEncompass Health Corporation (EHC) is a leading provider of rehabilitation services in the United States, specializing in inpatient rehabilitation. The company operates a network of inpatient rehabilitation hospitals where it delivers integrated healthcare services to patients recovering from conditions such as stroke, neurological disorders, and orthopedic issues. Encompass Health is dedicated to improving patient outcomes through personalized care plans and a multidisciplinary approach to rehabilitation.
How the Company Makes MoneyEncompass Health generates revenue primarily through its network of inpatient rehabilitation hospitals. The company earns money by providing specialized healthcare services to patients admitted to these facilities. Revenue is largely derived from payments made by Medicare, Medicaid, and private insurance for the rehabilitative care provided to patients. Additionally, Encompass Health benefits from strategic partnerships with healthcare systems, which help to expand its market reach and patient base. The company also focuses on optimizing operational efficiencies and patient outcomes to enhance its profitability and maintain a leading position in the rehabilitation sector.

Encompass Health Key Performance Indicators (KPIs)

Any
Any
Number of Hospitals
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.
Chart InsightsEncompass Health's hospital count has steadily increased from 137 in 2020 to 166 in 2024, reflecting a strategic focus on expansion. The latest earnings call underscores this growth trajectory, with plans for seven new hospitals and one satellite in 2025, particularly in Florida. This expansion aligns with their strong financial performance, including significant revenue and EBITDA growth. However, challenges such as rising medical costs and uncertain tax benefits could impact margins. The continued expansion is crucial for sustaining growth and capitalizing on the increasing demand for healthcare services.
Data provided by:Main Street Data

Encompass Health Earnings Call Summary

Earnings Call Date:Apr 24, 2025
(Q1-2025)
|
% Change Since: 5.83%|
Next Earnings Date:Aug 04, 2025
Earnings Call Sentiment Positive
The earnings call presented a positive outlook with significant revenue and EBITDA growth, strong discharge numbers, and reduced labor costs. However, challenges remain with increasing benefits expenses and issues with Palmetto's audit programs. Despite these challenges, the positive highlights outweigh the lowlights, and the sentiment is optimistic about future growth and expansion.
Q1-2025 Updates
Positive Updates
Strong Revenue and EBITDA Growth
First quarter revenues increased by 10.6% to $1.46 billion, and adjusted EBITDA rose by 14.9% to $313.6 million.
Significant Discharge Growth
Total discharge growth was 6.3% in the first quarter, with same-store discharges growing by 4.4%.
High Occupancy and Expansion Plans
Occupancy rates reached a high of 78.8%, prompting plans to add approximately 120 beds in both 2026 and 2027 and 300 beds through 6 de novos in 2025.
Reduced Premium Labor Costs
Premium labor costs decreased by $5 million from Q1 2024 to $28.6 million, indicating improved labor efficiency.
Increased Free Cash Flow Guidance
Adjusted free cash flow increased by 32.7% to $222.4 million, and full-year guidance was raised to $620 million to $715 million.
Negative Updates
Increased Benefits Expense
Benefits expense per FTE increased by 14%, driven by higher severity and frequency of group medical claims.
Challenges with Palmetto TPE and RCD Programs
TPE audit activity remains inconsistent, and the company continues to face challenges with Palmetto's RCD program in Alabama.
Continued Pressure from Pre-Authorization Processes
Pre-authorization processes with Medicare Advantage plans remain challenging and contribute to delays in admissions.
Company Guidance
During Encompass Health's First Quarter 2025 Earnings Call, the company reported a 10.6% increase in revenues to $1.46 billion and a 14.9% rise in adjusted EBITDA to $313.6 million. Total discharge growth was 6.3%, with same-store discharges increasing by 4.4%. Quality metrics showed a discharge to community rate of 84%, a discharge to acute rate of 8.9%, and a discharge to SNF rate of 6.4%. The annualized RN turnover rate decreased to 20.1% and therapist turnover to 6.3%. In response to strong demand, Encompass Health increased its 2025 guidance, expecting net operating revenue between $5.85 billion and $5.925 billion, adjusted EBITDA from $1.185 billion to $1.220 billion, and adjusted earnings per share between $4.85 and $5.10. Additionally, the company plans to expand its capacity with the opening of several new hospitals and bed additions in the coming years.

Encompass Health Financial Statement Overview

Summary
Encompass Health demonstrates solid financial performance with consistent revenue growth and strong operational margins. The balance sheet indicates moderate leverage with a strong equity position and high ROE. Cash flow has improved significantly, but there is room to enhance free cash flow relative to net income. Overall, the company is on a positive trajectory with sound financial health.
Income Statement
75
Positive
Encompass Health shows a robust income statement with a strong TTM revenue growth rate of approximately 2.6%, driven by increasing total revenue. The gross profit margin for TTM stands at 36.5%, indicating efficient cost management. However, the net profit margin for TTM is moderate at 9%, suggesting potential areas for improvement in managing expenses. The EBIT margin is healthy at 15.5%, and the EBITDA margin is solid at 21.8%, reflecting good operational efficiency. Overall, the company demonstrates consistent revenue growth and solid profitability metrics.
Balance Sheet
68
Positive
The balance sheet of Encompass Health reveals a stable financial position with a debt-to-equity ratio of 0.13, indicating moderate leverage. The return on equity (ROE) is strong at 17.2%, showcasing effective use of equity capital. The equity ratio is 43.4%, implying a healthy proportion of equity in the capital structure. While the company exhibits strong equity returns, the presence of significant debt warrants careful monitoring to avoid potential financial risks.
Cash Flow
70
Positive
Encompass Health's cash flow is characterized by a significant improvement in free cash flow, transitioning from a negative position in the previous period to a positive $97.1 million in TTM, indicating better cash management. The operating cash flow to net income ratio is strong at 1.54, highlighting efficient conversion of income to cash. However, the free cash flow to net income ratio is lower at 0.20, suggesting room for improvement in free cash flow generation relative to net income.
Breakdown
Income Statement
Total Revenue
Gross Profit
EBITDA
Net Income
Balance Sheet
Total Assets
Cash, Cash Equivalents and Short-Term Investments
Total Debt
Total Liabilities
Stockholders Equity
Cash Flow
Free Cash Flow
Operating Cash Flow
Investing Cash Flow
Financing Cash Flow

Encompass Health Technical Analysis

Technical Analysis Sentiment
Negative
Last Price107.17
Price Trends
50DMA
117.73
Negative
100DMA
110.96
Negative
200DMA
104.24
Positive
Market Momentum
MACD
-3.11
Positive
RSI
30.46
Neutral
STOCH
15.52
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 107.17 is below the 20-day moving average (MA) of 113.92, below the 50-day MA of 117.73, and above the 200-day MA of 104.24, indicating a neutral trend. The MACD of -3.11 indicates Positive momentum. The RSI at 30.46 is Neutral, neither overbought nor oversold. The STOCH value of 15.52 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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

Overall Rating
UnderperformOutperform
Sector (46)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
73
Outperform
$9.98B8.1618.66%0.52%9.61%39.65%
70
Outperform
$10.97B14.38260.92%5.11%14.28%
67
Neutral
$14.21B9.7941.09%-1.09%-43.10%
66
Neutral
$6.89B22.9326.11%0.43%8.52%10.36%
66
Neutral
$15.22B22.764.36%0.11%-0.91%27.17%
65
Neutral
$10.85B22.2325.33%0.63%11.21%30.38%
46
Neutral
C$205.70M-3.34-23.14%2.45%20.79%-0.36%
* Healthcare Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
EHC
Encompass Health
107.17
15.06
16.35%
CHE
Chemed
466.08
-98.06
-17.38%
DVA
DaVita
145.31
8.84
6.48%
FMS
Fresenius Medical Care
25.83
6.57
34.11%
THC
Tenet Healthcare
156.52
6.36
4.24%
UHS
Universal Health
154.95
-59.29
-27.67%

Encompass Health Corporate Events

Business Operations and StrategyFinancial Disclosures
Encompass Health Highlights Financial Measures in New Book
Positive
Jun 25, 2025

Encompass Health has published its Investor Reference Book, highlighting the importance of non-GAAP financial measures like Adjusted EBITDA and adjusted free cash flow in assessing its financial performance and liquidity. These measures are crucial for understanding the company’s ability to service debt and make capital expenditures. The company emphasizes the significance of maintaining compliance with financial covenants in its credit agreements, as noncompliance could lead to financial restrictions. Encompass Health’s strategic focus on growth through new developments and acquisitions, alongside its financial strength, positions it well in the healthcare industry, despite potential risks such as regulatory changes and market pressures.

The most recent analyst rating on (EHC) stock is a Buy with a $105.00 price target. To see the full list of analyst forecasts on Encompass Health stock, see the EHC Stock Forecast page.

Financial Disclosures
Encompass Health Updates on 2025 Financial Projections
Neutral
Jun 3, 2025

Encompass Health has provided a financial update regarding its inability to predict certain non-GAAP financial measures due to factors outside its control, such as government settlements and market conditions. The company has estimated specific GAAP measures for 2025, including interest expense and amortization of debt-related items, which will be part of a reconciliation for Adjusted EBITDA.

The most recent analyst rating on (EHC) stock is a Buy with a $105.00 price target. To see the full list of analyst forecasts on Encompass Health stock, see the EHC Stock Forecast page.

Shareholder MeetingsBusiness Operations and Strategy
Encompass Health Shareholders Approve 2025 Incentive Plan
Positive
May 2, 2025

On May 1, 2025, Encompass Health Corporation’s stockholders approved the 2025 Omnibus Performance Incentive Plan during the annual meeting. The meeting also saw the election of ten directors, ratification of PricewaterhouseCoopers LLP as the independent auditor, and approval of executive compensation, reflecting strong shareholder support for the company’s strategic direction.

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.Date of analysis: Jul 16, 2025