Encompass Health (EHC)
NYSE:EHC
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Encompass Health
(NYSE:EHC)
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Rating:74Outperform
Price Target:
$120.00
▲(12.79% Upside)
Action:Reiterated
Date:05/16/26
The score is driven primarily by solid financial fundamentals and a notably positive earnings update with raised 2026 guidance and strong Q1 execution. Valuation is supportive with a low P/E, while technicals are mixed (stronger short-term trend but still below the 200-day moving average). The key financial risk to monitor is the recent TTM drop in free cash flow conversion.
Positive Factors
Revenue & Profitability Growth
Sustained top-line and EBITDA expansion shows durable demand for inpatient rehab and effective pricing/mix execution. Mid‑20s EBITDA margins and recent guidance lift imply repeatable operating leverage that supports reinvestment, debt service and long‑term margin resilience.
Negative Factors
Weakened Free Cash Flow Conversion
A sharp TTM decline in free cash flow conversion signals rising capex or working capital demands that can strain the cash available for buybacks, debt reduction and discretionary investments. Sustained weakness would tighten liquidity and increase reliance on debt markets or pressuring leverage covenants.
Read all positive and negative factors
Positive Factors
Negative Factors
Revenue & Profitability Growth
Sustained top-line and EBITDA expansion shows durable demand for inpatient rehab and effective pricing/mix execution. Mid‑20s EBITDA margins and recent guidance lift imply repeatable operating leverage that supports reinvestment, debt service and long‑term margin resilience.
Read all positive factors
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 (EHC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$10.51B
Dividend Yield0.65%
Average Volume (3M)983.41K
Price to Earnings (P/E)12.3
Beta (1Y)0.55
Revenue Growth10.05%
EPS Growth23.59%
CountryUS
Employees28,572
SectorHealthcare
Sector Strength45
IndustryMedical - Care Facilities
Share Statistics
EPS (TTM)6.08
Shares Outstanding99,199,080
10 Day Avg. Volume919,063
30 Day Avg. Volume983,408
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 Cap1.24
Enterprise Value/Revenue2.14
Enterprise Value/Gross Profit3.64
Enterprise Value/Ebitda9.00
Forecast
1Y Price Target
$141.25Price Target Upside32.77% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering6
EPS Forecast (FY)5.99
Revenue Forecast (FY)$6.43B
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 Earnings Call Summary
Earnings Call Date:Apr 30, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:Aug 04, 2026
Earnings Call Sentiment Positive
The call presented multiple material operating and financial wins: double-digit EBITDA growth, revenue growth, improved clinical quality metrics, lower RN turnover, meaningful decline in premium labor, strong free cash flow and an expanded development pipeline. Offsetting these positives were manageable headwinds: short-term volume impact from unit closures (~85 bps), a one-time increase in bad debt tied to legacy claim write-offs, MA utilization variability, regulatory implementation risk and localized capacity constraints in high-demand markets. Management emphasized plans to address capacity via bed adds, de novos, joint ventures and small-format hospitals, and raised full-year guidance based on Q1 performance. Overall, positives materially outweighed the negatives.Positive Updates
Top-Line and Profitability Growth
Q1 revenue increased 9% year-over-year to $1.59 billion; adjusted EBITDA rose 11.2% to $348.8 million. Company raised 2026 guidance to net operating revenue of $6.375B–$6.470B, adjusted EBITDA $1.35B–$1.38B, and adjusted EPS $5.89–$6.11.
Negative Updates
Unit Closures Depressed Volume
Closures of 4 hosted units (3 IRF units within acute hospitals and 1 SNF unit) reduced total and same-store discharge growth by ~85 basis points in Q1; an additional 18-bed hosted unit in Evansville planned to close in early 2027 (consolidation actions may shift volume).
Read all updates
Q1-2026 Updates
Positive
Negative
Top-Line and Profitability Growth
Q1 revenue increased 9% year-over-year to $1.59 billion; adjusted EBITDA rose 11.2% to $348.8 million. Company raised 2026 guidance to net operating revenue of $6.375B–$6.470B, adjusted EBITDA $1.35B–$1.38B, and adjusted EPS $5.89–$6.11.
Read all positive updates
Company Guidance
Encompass Health raised its 2026 guidance, now expecting net operating revenue of $6.375–$6.470 billion, adjusted EBITDA of $1.35–$1.38 billion and adjusted EPS of $5.89–$6.11. The raise follows a strong Q1 (revenue $1.59B, +9%; adjusted EBITDA $348.8M, +11.2%; adjusted free cash flow $194M) driven by 4.3% discharge growth (1.6% same‑store) and a 3.7% increase in net revenue per discharge (bad debt 2.2%, +20 bps). Management reiterated full‑year net pre‑opening/ramp costs of $18–$22M (Q1: $4M), expects net provider tax EBITDA impact roughly flat at ~$21M, and disclosed a growth CapEx midpoint of $725M with a free cash flow midpoint of ~$818M; Q1 share repurchases were ~$71.6M (≈708k shares), dividends were $0.19 per share, and net leverage was 1.9x at quarter end. They also plan to open 7 hospitals (≈340 beds) and add 100–150 beds to existing hospitals in 2026, with a pipeline of 11 hospitals (520 beds) beyond 2026.Encompass Health Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
74
Positive
Cash Flow
62
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 6.07B | 5.94B | 5.37B | 4.80B | 4.35B | 4.01B |
| Gross Profit | 3.57B | 5.68B | 2.23B | 1.98B | 1.75B | 1.70B |
| EBITDA | 1.44B | 1.40B | 1.19B | 1.01B | 870.10M | 888.90M |
| Net Income | 609.20M | 566.20M | 455.70M | 352.00M | 271.00M | 412.20M |
Balance Sheet | ||||||
| Total Assets | 7.31B | 7.09B | 6.53B | 6.10B | 5.64B | 6.86B |
| Cash, Cash Equivalents and Short-Term Investments | 200.50M | 145.10M | 85.40M | 141.80M | 21.80M | 49.40M |
| Total Debt | 2.79B | 2.71B | 2.71B | 2.93B | 2.99B | 3.48B |
| Total Liabilities | 3.95B | 3.81B | 3.69B | 3.81B | 3.77B | 4.47B |
| Stockholders Equity | 2.52B | 2.44B | 2.07B | 1.65B | 1.31B | 1.91B |
Cash Flow | ||||||
| Free Cash Flow | 464.40M | 439.20M | 360.30M | 267.70M | 121.70M | 164.60M |
| Operating Cash Flow | 1.20B | 1.18B | 1.00B | 850.80M | 705.80M | 715.80M |
| Investing Cash Flow | -754.40M | -762.80M | -653.30M | -602.80M | -627.00M | -666.30M |
| Financing Cash Flow | -405.10M | -433.00M | -330.60M | -197.20M | -145.70M | -240.10M |
Encompass Health Technical Analysis
Negative
106.39
Price Trends
103.01
Positive
103.37
Positive
110.92
Negative
Market Momentum
0.59
Positive
48.37
Neutral
41.63
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 106.39 is above the 20-day moving average (MA) of 105.02, above the 50-day MA of 103.01, and below the 200-day MA of 110.92, indicating a neutral trend. The MACD of 0.59 indicates Positive momentum. The RSI at 48.37 is Neutral, neither overbought nor oversold. The STOCH value of 41.63 is Neutral, 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
UnderperformOutperform
Sector (51)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $10.51B | 12.33 | 25.35% | 0.65% | 10.05% | 23.59% | |
72 Outperform | $9.95B | 7.84 | 20.93% | 0.35% | 10.42% | 33.92% | |
69 Neutral | $10.42B | 29.20 | 16.63% | 0.14% | 19.23% | 15.67% | |
68 Neutral | $12.64B | 13.11 | -133.12% | ― | 6.68% | 2.79% | |
67 Neutral | $16.14B | 5.83 | 40.55% | ― | 4.56% | 27.14% | |
60 Neutral | $12.99B | 22.85 | 7.16% | 3.29% | 7.24% | 67.43% | |
51 Neutral | $7.86B | -0.30 | -43.30% | 2.27% | 22.53% | -2.21% |
* Healthcare Sector Average
EHC
Encompass Health
104.45
-13.66
-11.57%
DVA
DaVita
198.66
60.47
43.76%
FMS
Fresenius Medical Care
22.50
-6.52
-22.47%
THC
Tenet Healthcare
178.00
15.02
9.22%
ENSG
The Ensign Group
171.68
27.34
18.94%
UHS
Universal Health
162.45
-23.03
-12.41%
Encompass Health Corporate Events
Business Operations and StrategyPrivate Placements and Financing
Encompass Health Announces New Senior Notes Offering
Positive
May 15, 2026
On May 14, 2026, Encompass Health announced it had entered into a purchase agreement with Wells Fargo Securities to issue $500 million of 5.875% senior unsecured notes due 2034 in a private offering, with closing expected around May 29, 2026. The ...
Executive/Board ChangesShareholder Meetings
Encompass Health Stockholders Back Board, Auditor and Pay
Positive
May 11, 2026
At the Annual Meeting held on May 7, 2026, Encompass Health stockholders voted on the election of ten board nominees, ratification of PricewaterhouseCoopers LLP as independent auditor, and approval of executive compensation, with 92.5% of the comp...
Business Operations and StrategyFinancial Disclosures
Encompass Health Lifts 2026 Outlook After Strong Q1
Positive
Apr 30, 2026
For the first quarter ended March 31, 2026, Encompass Health reported net operating revenue of $1.59 billion, up 9% year on year, with diluted EPS from continuing operations rising 19.6% to $1.77 and adjusted EPS up 16.8% to $1.60, while Adjusted ...
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...
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.