Encompass Health (EHC) AI Stock Analysis

• Market Cap: $12.03B
• Dividend Yield: 0.57%
• Average Volume (3M): 617.93K
• Price to Earnings (P/E): 24.6
• Beta (1Y): 0.59
• Revenue Growth: 11.21%
• EPS Growth: 30.38%
• Country: US
• Employees: 28,572
• Sector: Healthcare
• Sector Strength: 40
• Industry: Medical - Care Facilities
• EPS (TTM): 1.37
• Shares Outstanding: 100,796,930
• 10 Day Avg. Volume: 610,955
• 30 Day Avg. Volume: 617,928
• PEG Ratio: 0.68
• Price to Book (P/B): 3.99
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 23.35
• Enterprise Value/Market Cap: 0.72
• Enterprise Value/Revenue: 0.41
• Enterprise Value/Gross Profit: 4.30
• Enterprise Value/Ebitda: 1.87
• 1Y Price Target: $131.56
• Price Target Upside: 11.73% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 10

• Rating: 75 Outperform
• Price Target: $136.00 ▲(15.50%Upside)

Encompass Health receives a strong overall score driven by solid financial performance and positive earnings outlook. The technical indicators suggest bullish momentum, supporting the stock's upward trajectory. While valuation metrics are less compelling, the company's strategic initiatives and positive earnings guidance enhance its growth prospects.

Positive Factors

Earnings

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%.

Guidance

Management modestly raised guidance across all key metrics, including a 1% raise in revenue guidance and a 2% increase in the adjusted EBITDA outlook.

Operational Performance

The positive first-quarter results reflect both a strong demand environment for inpatient rehab facilities and continued execution from Encompass, despite a challenging operating environment.

Negative Factors

Medicare Changes

Some cuts to Medicare Advantage could be considered by the Senate, which may impact companies involved in this program.

Uncertainty

Uncertainty remains about potential cuts to Medicare Advantage, which could affect future spending and benefits.

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 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 a solid financial performance with consistent revenue growth and strong operational margins. While the balance sheet indicates moderate leverage, the company maintains a healthy equity position and generates strong returns on equity. The cash flow statement reflects improved cash management, although there is potential to enhance free cash flow relative to net income. Overall, the company is on a positive trajectory with sound financial health, but should continue to monitor debt levels and cash flow efficiency.

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	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	5.51B	5.37B	4.80B	4.35B	5.12B	4.64B
Gross Profit	2.01B	2.47B	933.50M	4.15B	4.91B	4.44B
EBITDA	1.25B	1.19B	1.02B	873.80M	879.00M	815.20M
Net Income	494.70M	455.70M	352.00M	271.00M	412.20M	284.20M
Balance Sheet
Total Assets	6.64B	6.53B	6.10B	5.64B	6.86B	6.45B
Cash, Cash Equivalents and Short-Term Investments	95.80M	85.40M	69.10M	21.80M	54.80M	224.00M
Total Debt	2.70B	2.71B	2.93B	2.99B	3.54B	3.54B
Total Liabilities	3.70B	3.69B	3.81B	3.77B	4.47B	4.44B
Stockholders Equity	2.16B	2.07B	1.65B	1.31B	1.91B	1.59B
Cash Flow
Free Cash Flow	386.40M	360.30M	267.70M	121.70M	164.60M	296.50M
Operating Cash Flow	1.05B	1.00B	850.80M	705.80M	715.80M	704.70M
Investing Cash Flow	-700.50M	-512.90M	-602.80M	-627.00M	-666.30M	-407.50M
Financing Cash Flow	-541.70M	-330.60M	-197.20M	-145.70M	-240.10M	-145.90M

Encompass Health Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 117.75
• 50DMA: Negative
• 100DMA: Positive
• 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 Neutral. The current price of 117.75 is below the 20-day moving average (MA) of 119.89, below the 50-day MA of 119.19, and above the 200-day MA of 103.16, indicating a neutral trend. The MACD of 0.14 indicates Positive momentum. The RSI at 42.69 is Neutral, neither overbought nor oversold. The STOCH value of 18.81 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for EHC.

Encompass Health Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
UHS	77 Outperform	$11.69B	10.19	18.35%	0.44%	9.73%	51.87%
FMS	77 Outperform	$16.49B	24.63	4.36%	2.82%	-0.91%	27.17%
EHC	75 Outperform	$12.03B	24.65	25.33%	0.57%	11.21%	30.38%
THC	71 Outperform	$16.01B	11.33	38.12%	―	-1.79%	-41.85%
CHE	66 Neutral	$6.82B	22.70	26.11%	0.43%	8.52%	10.36%
DVA	66 Neutral	$10.78B	14.23	260.92%	―	5.11%	14.28%
Sector *	46 Neutral	C$198.48M	-3.49	-23.22%	2.62%	21.07%	-1.26%

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.

Encompass Health Appoints New COO Patrick W. Tuer

On April 24, 2025, Encompass Health announced the appointment of Patrick W. Tuer as Executive Vice President and Chief Operating Officer. Mr. Tuer has been with the company since 2018, holding various leadership roles, and his promotion reflects his significant contributions to the company’s operations. In the first quarter of 2025, Encompass Health reported a 10.6% increase in revenue, driven by higher discharges and pricing, and a 14.9% rise in Adjusted EBITDA. The company also raised its full-year guidance, indicating strong performance and positive future prospects.