Here's Why Encompass Health Shares Are Attracting Investors Now
May 27, 2025
Encompass Health Corporation
EHC is strategically positioned to grow on the back of delivering high-quality, cost-effective, integrated care in the healthcare space. The company has gained 28.8% in the year-to-date (YTD) period, outperforming the industry average of 2.7%.
Encompass Health — with a market cap of $12 billion — is an integrated healthcare services company based in Birmingham, AL. It offers facility-based patient care through its network of inpatient rehabilitation hospitals. The company has a national footprint that includes 166 hospitals across 38 states and Puerto Rico. Its forward P/E ratio of 22.78X is higher than the industry average of 19.62X, indicating growing investor confidence.
Courtesy of solid prospects, Encompass Health currently sports a Zacks Rank #1 (Strong Buy) and a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology.
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Where Do EHC’s Estimates Stand?
The Zacks Consensus Estimate for Encompass Health’s 2025 earnings is pegged at $5.01 per share, indicating a 13.1% year-over-year rise. In the past two months, it has witnessed eight upward estimate revisions against none in the opposite direction. Furthermore, the consensus mark for revenues is pegged at $5.9 billion for 2025, implying a 9.5% year-over-year rise.
It beat earnings estimates in each of the past four quarters with an average surprise of 12.3%.
EHC’s Growth Drivers
Encompass Health’s revenue growth benefited from increased discharge and pricing. Its total discharge rose 6.3% year over year in the first quarter of 2025. Its net patient revenue per discharge grew 3.9% year over year, which surpassed the Zacks Consensus Estimate by 1.6%.
EHC’s highly competent and dedicated clinical team helped the company to accommodate the increased volume while maintaining the outstanding patient outcomes. EHC aims to continue investing in its clinical team to provide developmental programs and professional growth.
Its rapid expansion of hospitals with the Piedmont partnership will result in strong volume. Overall, EHC plans to open seven de novos with 340 beds and a 50-bed freestanding satellite hospital in 2025.
The company’s financial stability is reinforced by its strong liquidity position and robust cash flow generation. As of March 31, 2025, Encompass Health held $95.8 million in cash and cash equivalents, up 12.2% from the 2024-end level. Operating cash flows increased 17.9% year over year in 2024 and 20.9% in the first quarter of 2025.
The company boasts a favorable trailing 12-month return on invested capital of 9.7%, surpassing the industry average of 5.8%. EHC increased its net operating revenue forecast, now to be in the range of $5.85-$5.925 billion. It also increased its adjusted EPS guidance to be between $4.85 and $5.10.
Risks
There are some factors, however, that investors should keep a careful eye on.
The company’s operating expenses escalated over the last several years due to higher salaries and benefits expenses. Total expenses increased 10.4% in 2021, 10.8% in 2022, 9.4% in 2023, 10.8% in 2024 and 7.2% in the first quarter of 2025. The persistent escalation of expenses might weigh on its margin growth.
The company carries a significant long-term debt, net of the current portion, which amounted to $2.3 billion at the end of the first quarter. This leads to a net debt-to-capitalization of 45.1%, higher than the industry average of 41.1%.
Other Stocks to Consider
Other top-ranked stocks in the Medical space are
Clover Health Investments Corp
CLOV,
GeneDx Holdings Corp
WGS and
Integer Holdings Corporation
ITGR, each currently sporting a Zacks Rank #1. You can see
the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Clover Health Investments’ current-year earnings of 11 cents per share has witnessed one upward revision in the past 30 days against no movement in the opposite direction. Clover Health Investments beat earnings estimates in each of the trailing four quarters, with the average surprise being 114.6%. The consensus estimate for current-year revenues is pegged at $1.9 billion, suggesting 37.7% year-over-year growth.
The Zacks Consensus Estimate for GeneDx Holdings’ current-year earnings of $1.09 per share has witnessed one upward revision in the past 30 days against no movement in the opposite direction. GeneDx Holdings beat earnings estimates in each of the trailing four quarters, with the average surprise being 145.8%. The consensus estimate for current-year revenues is pegged at $374.1 billion, suggesting 22.5% year-over-year growth.
The Zacks Consensus Estimate for Integer Holdings’ current-year earnings of $6.33 per share has witnessed five upward revisions in the past 30 days against no movement in the opposite direction. Integer Holdings beat earnings estimates in three of the trailing four quarters and missed once, with the average surprise being 2.8%. The consensus estimate for current-year revenues is pegged at $1.9 billion, suggesting 7.7% year-over-year growth.
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