Encompass Health (EHC) AI Stock Analysis

• Market Cap: $10.85B
• Dividend Yield: 0.63%
• Average Volume (3M): 874.26K
• Price to Earnings (P/E): 22.2
• Beta (1Y): 0.57
• Revenue Growth: 11.21%
• EPS Growth: 30.38%
• Country: US
• Employees: 28,572
• Sector: Healthcare
• Sector Strength: 42
• Industry: Medical - Care Facilities
• EPS (TTM): 1.37
• Shares Outstanding: 100,796,930
• 10 Day Avg. Volume: 1,255,475
• 30 Day Avg. Volume: 874,265
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $132.80
• Price Target Upside: 23.92% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 6

• Rating: 65 Neutral
• 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 Business Overview & Revenue Model

Company Description

Encompass 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 Money

Encompass 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 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

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

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

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 Price: 107.17
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• 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 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 Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
UHS	73 Outperform	$9.98B	8.16	18.66%	0.52%	9.61%	39.65%
DVA	70 Outperform	$10.97B	14.38	260.92%	―	5.11%	14.28%
THC	67 Neutral	$14.21B	9.79	41.09%	―	-1.09%	-43.10%
CHE	66 Neutral	$6.89B	22.93	26.11%	0.43%	8.52%	10.36%
FMS	66 Neutral	$15.22B	22.76	4.36%	0.11%	-0.91%	27.17%
EHC	65 Neutral	$10.85B	22.23	25.33%	0.63%	11.21%	30.38%
Sector *	46 Neutral	C$205.70M	-3.34	-23.14%	2.45%	20.79%	-0.36%

Encompass Health Corporate Events

Encompass Health Highlights Financial Measures in New Book

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.

Encompass Health Updates on 2025 Financial Projections

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.

Encompass Health Shareholders Approve 2025 Incentive Plan

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.