Encompass Health (EHC) AI Stock Analysis

• Market Cap: $11.80B
• Dividend Yield: 0.56%
• Average Volume (3M): 1.02M
• Price to Earnings (P/E): 24.0
• Beta (1Y): 0.63
• Revenue Growth: 11.21%
• EPS Growth: 30.38%
• Country: US
• Employees: 28,572
• Sector: Healthcare
• Sector Strength: 54
• Industry: Medical - Care Facilities
• EPS (TTM): 1.37
• Shares Outstanding: 100,796,930
• 10 Day Avg. Volume: 1,138,192
• 30 Day Avg. Volume: 1,019,385
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 1.16
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 5.52
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $128.78
• Price Target Upside: 11.10% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 10

Encompass Health's overall stock score reflects strong financial results and strategic growth plans, bolstered by positive earnings call outcomes and strategic corporate events. However, the stock's high valuation and technical indicators suggest investors should remain cautious of overbought conditions. While the company shows robust growth prospects, particularly with its expansion initiatives, the valuation poses a balanced risk-reward scenario.

Positive Factors

Earnings

First quarter results demonstrated broad-based strength across all categories with revenues up 11%, EBITDA up 15%, and adjusted EPS up 22%.

Financial Performance

Encompass Health increased its revenue and margin guidance, showing confidence in its financial performance.

Leadership Changes

A new COO has been announced, with Patrick Tuer taking the role, bringing significant operating experience and making a positive impression on investors.

Negative Factors

Growth Challenges

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.

Market Comparisons

Same-store volumes decelerated due to tougher comparisons, though they still exceeded consensus estimates.

Operational Risks

The model’s durability gives incremental comfort in the belief in Encompass as a core defensive name, with minimal exposure to key macro risks impacting the healthcare services space.

Encompass Health Business Overview & Revenue Model

Company Description

Encompass Health Corporation (EHC) is a leading provider of post-acute healthcare services, primarily focusing on inpatient rehabilitation services. The company operates a nationwide network of rehabilitation hospitals, offering specialized care for patients recovering from debilitating illnesses or injuries, including stroke, neurological disorders, and orthopedic conditions. With an emphasis on comprehensive rehabilitation, Encompass Health is committed to helping patients regain their independence and improve their quality of life through a multidisciplinary approach involving physical, occupational, and speech therapy.

How the Company Makes Money

Encompass Health generates revenue primarily through its network of inpatient rehabilitation hospitals. The company's revenue model is centered around providing specialized rehabilitation services to patients, which are reimbursed by a combination of government healthcare programs such as Medicare and Medicaid, as well as private health insurance providers. Key revenue streams come from patient care services, including therapy sessions and related healthcare services provided during a patient's stay at their facilities. Encompass Health's financial performance is influenced by factors such as patient admissions, length of stay, reimbursement rates from insurers, and operational efficiency of its hospitals. The company may also engage in strategic partnerships and acquisitions to expand its service offerings and geographic presence, further contributing to its revenue growth.

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
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
5.37B	4.80B	4.35B	5.12B	4.64B
	Gross Profit
2.47B	933.50M	4.15B	4.91B	4.44B
	EBIT
864.50M	731.80M	627.90M	822.80M	661.90M
	EBITDA
1.19B	1.02B	873.80M	879.00M	815.20M
	Net Income Common Stockholders
455.70M	352.00M	271.00M	412.20M	284.20M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
85.40M	69.10M	21.80M	54.80M	224.00M
	Total Assets
6.53B	6.10B	5.64B	6.86B	6.45B
	Total Debt
2.71B	2.93B	2.99B	3.54B	3.54B
	Net Debt
2.63B	2.86B	2.97B	3.48B	3.32B
	Total Liabilities
3.69B	3.81B	3.77B	4.47B	4.44B
	Stockholders Equity
2.07B	1.65B	1.31B	1.91B	1.59B
Cash Flow		Free Cash Flow
360.30M	267.70M	121.70M	164.60M	296.50M
	Operating Cash Flow
1.00B	850.80M	705.80M	715.80M	704.70M
	Investing Cash Flow
-512.90M	-602.80M	-627.00M	-666.30M	-407.50M
	Financing Cash Flow
-330.60M	-197.20M	-145.70M	-240.10M	-145.90M

Encompass Health Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 115.91
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EHC, the sentiment is Positive. The current price of 115.91 is above the 20-day moving average (MA) of 109.43, above the 50-day MA of 103.22, and above the 200-day MA of 97.30, indicating a bullish trend. The MACD of 4.46 indicates Negative momentum. The RSI at 67.52 is Neutral, neither overbought nor oversold. The STOCH value of 66.49 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for EHC.

Encompass Health Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
THC	78 Outperform	$14.07B	10.02	38.12%	―	-1.79%	-41.85%
FMS	77 Outperform	$15.02B	25.81	4.36%	1.57%	-0.91%	27.17%
CHE	75 Outperform	$8.43B	28.06	26.11%	0.33%	8.52%	10.36%
UHS	73 Outperform	$12.01B	10.00	18.35%	0.43%	9.73%	51.87%
EHC	68 Neutral	$11.80B	24.01	25.33%	0.56%	11.21%	30.38%
DVA	64 Neutral	$10.96B	13.27	159.08%	―	5.56%	45.02%
Sector *	52 Neutral	$5.21B	3.55	-41.91%	2.83%	15.12%	0.42%

Encompass Health Corporate Events

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.

Spark’s Take on EHC Stock

According to Spark, TipRanks’ AI Analyst, EHC is a Outperform.

Encompass Health’s stock score reflects a robust financial performance characterized by consistent revenue growth and solid operational margins. The company benefits from positive earnings call outcomes and strategic corporate events, such as leadership changes and strong financial results. However, the stock’s high valuation and technical indicators suggest potential caution due to overbought conditions. Overall, while the company shows strong growth prospects, investors should be mindful of valuation and technical analysis signals.

To see Spark’s full report on EHC stock, click here.

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.

Spark’s Take on EHC Stock

According to Spark, TipRanks’ AI Analyst, EHC is a Neutral.

Encompass Health’s overall stock score reflects strong financial results and strategic growth plans as highlighted in the recent earnings call, countered by concerns over cash flow management and neutral technical indicators. While the company shows potential for growth, particularly with its expansion initiatives, the stock’s valuation suggests a balanced risk-reward scenario at present.

To see Spark’s full report on EHC stock, click here.

Encompass Health Approves Executive Compensation Increases

In a meeting held on February 19-20, 2025, Encompass Health Corporation’s Board of Directors approved compensation increases for its executives for 2025. These decisions included a salary and bonus raise for CEO Mark J. Tarr, as well as adjustments for other key executives, to enhance competitive compensation packages and potentially improve retention and motivation within the leadership team.