Encompass Health
EHC
$120.31
-0.50%
Encompass Health Corporation is a leading provider of post-acute healthcare services in the United States, operating a network of inpatient rehabilitation hospitals that specialize in treating patients recovering from conditions such as stroke, neurological disorders, and complex orthopedic injuries. As the largest owner and operator of inpatient rehabilitation hospitals in the U.S., the company holds a dominant market position in this niche segment, differentiating itself through scale and specialized care. The current investor narrative centers on the company's robust revenue growth, driven by an aging population and increased demand for rehabilitation services, alongside a recent surge in stock price following strong quarterly results and a favorable outlook for Medicare reimbursement. Additionally, the company's consistent dividend declarations and share repurchase program underscore its commitment to returning capital to shareholders, while analysts maintain a bullish consensus with a strong buy rating.…
EHC
Encompass Health
$120.31
Related headlines
Investment Opinion: Should I buy EHC Today?
Rating: Buy. Encompass Health offers a compelling risk/reward with a consensus 'Strong Buy' rating and an average target price of $148.17, implying 23.2% upside. The thesis is supported by strong revenue growth, high profitability, and a PEG ratio of 0.78x, indicating undervaluation relative to growth.
Sign up to view all
EHC 12-Month Price Forecast
The AI assessment is bullish, driven by strong revenue growth, high profitability, and a favorable valuation. However, confidence is medium due to the high debt level and Medicare concentration. The stance would be upgraded to high confidence if the company reduces leverage or diversifies revenue streams, and downgraded to neutral if Medicare reimbursement rates are cut or growth decelerates below 7%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Encompass Health's 12-month outlook, with a consensus price target around $148.17 and implied upside of +23.1% versus the current price.
Average Target
$148.17
0 analysts
Implied Upside
+23.1%
vs. current price
Analyst Count
—
covering this stock
Price Range
$140 - $155
Analyst target range
Encompass Health is covered by 12 analysts, with a consensus recommendation of 'Strong Buy' (mean rating of 1.08 on a 1-5 scale, where 1 is Strong Buy). The average target price is $148.17, implying a 23.2% upside from the current price of $120.31. The distribution of ratings is overwhelmingly bullish, with no hold or sell ratings, reflecting strong confidence in the company's prospects. The high target of $155.00 suggests potential for further upside, while the low target of $140.00 still represents a 16.4% increase from current levels, indicating that even the most bearish analyst sees significant value.
Bulls vs Bears: EHC Investment Factors
Encompass Health presents a compelling bull case with strong revenue growth, high profitability, and unanimous analyst bullishness. However, the bear case highlights significant leverage, heavy Medicare dependence, and a stock trading near its 52-week high with negative relative strength. Currently, the bull case has stronger evidence, driven by robust fundamentals and a PEG ratio below 1, but the key tension lies in the sustainability of Medicare reimbursement rates and the company's ability to manage its debt load. If reimbursement rates are cut or growth decelerates, the stock could face significant downside, making this the most critical factor to monitor.
Bullish
- Strong Revenue Growth: Q1 2026 revenue grew 9.0% YoY to $1.5866B, with consistent acceleration from $1.301B in Q2 2024. This growth is driven by an aging population and increased demand for inpatient rehabilitation services, positioning the company for sustained expansion.
- Undervalued on PEG Ratio: The PEG ratio of 0.78x indicates the stock is undervalued relative to its growth rate, as a PEG below 1 typically signals undervaluation. This suggests the market has not fully priced in the company's growth prospects.
- Strong Analyst Consensus: All 12 analysts rate EHC as 'Strong Buy' (mean rating 1.08), with an average target price of $148.17, implying 23.2% upside from the current price of $120.31. Even the lowest target of $140.00 represents a 16.4% increase, reflecting high confidence.
- High Profitability Metrics: The company boasts a gross margin of 95.7% and an operating margin of 17.7%, demonstrating efficient operations and strong pricing power. Net margin of 9.5% further underscores profitability, with ROE at 23.2% indicating effective capital utilization.
Bearish
- High Debt-to-Equity Ratio: The debt-to-equity ratio of 1.11x indicates significant leverage, which could strain financial flexibility if interest rates rise or cash flows weaken. This is a concern given the capital-intensive nature of healthcare facilities.
- Revenue Concentration in Medicare: Medicare accounts for 65.5% of revenue, making the company highly sensitive to changes in Medicare reimbursement rates. Any adverse policy changes could significantly impact revenue and profitability.
- Stock Near 52-Week High: Trading at 94% of its 52-week range (between $92.77 and $127.99), the stock is near its upper band, suggesting limited upside potential in the near term and possible overextension. The 1-year price change of -2.5% also indicates underperformance relative to the S&P 500.
- Negative Relative Strength vs S&P 500: Over the past year, EHC's relative strength is -23.0% compared to the S&P 500, meaning it has significantly underperformed the broader market. This could signal weaker investor sentiment or sector-specific headwinds.
EHC Technical Analysis
Encompass Health's stock has exhibited a volatile yet upward trajectory over the past year, with the current price of $120.31 representing a 2.5% decline from a year ago, despite a 13.1% gain year-to-date. The stock is trading at 94% of its 52-week range (between $92.77 and $127.99), indicating it is near the upper end of its yearly band, which typically signals strong momentum but also potential overextension. The 1-year price change of -2.5% contrasts with the 6-month change of +12.9%, suggesting that the stock has recovered from earlier weakness and is now in a clear uptrend, though it remains below its all-time high.
Beta
0.60
0.60x market volatility
Max Drawdown
-26.2%
Largest decline past year
52-Week Range
$93-$128
Price range past year
Annual Return
-2.5%
Cumulative gain past year
| Period | EHC Return | S&P 500 |
|---|---|---|
| 1m | +8.4% | +3.6% |
| 3m | +14.6% | +2.7% |
| 6m | +12.9% | +11.4% |
| 1y | -2.5% | +18.7% |
| ytd | +13.1% | +12.3% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
EHC Fundamental Analysis
Encompass Health's revenue has been growing steadily, with the most recent quarter (Q1 2026) reporting revenue of $1.5866 billion, a 9.0% increase year-over-year. This growth is part of a multi-quarter trend, with revenue rising from $1.301 billion in Q2 2024 to $1.5866 billion in Q1 2026, reflecting consistent acceleration. The growth is primarily driven by the inpatient rehabilitation segment, which benefits from an aging population and increased demand for post-acute care. The company's revenue mix is heavily weighted toward Medicare (65.5% of revenue), followed by managed care (10.6%), Medicaid (2.9%), and other payors, with Medicare's favorable reimbursement rates supporting overall revenue growth.
Quarterly Revenue
$1.6B
2026-03
Revenue YoY Growth
+9.0%
YoY Comparison
Gross Margin
48.4%
Latest Quarter
Free Cash Flow
$464399999.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
Open an Account, get $2 TSLA now!
Valuation Analysis: Is EHC Overvalued?
Given Encompass Health's positive net income, the price-to-earnings (PE) ratio is the most appropriate valuation metric. The trailing PE is 18.9x, while the forward PE is 18.0x, indicating that the market expects modest earnings growth. The gap between trailing and forward PE is narrow, suggesting stable earnings expectations. The company's PEG ratio of 0.78x implies that the stock is undervalued relative to its growth rate, as a PEG below 1 typically signals undervaluation.
PE
18.9x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 12x~25x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
9.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: Encompass Health carries a debt-to-equity ratio of 1.11x, indicating substantial leverage that could amplify earnings volatility and increase interest expense, which was $31.8M in Q1 2026. The company's net margin of 9.5% is relatively thin, leaving limited buffer against cost inflation or reimbursement cuts. Additionally, revenue is heavily concentrated in Medicare (65.5%), making the company vulnerable to policy changes. The current ratio of 1.08x suggests tight liquidity, which could constrain operational flexibility in a downturn.
FAQ
The key risks are: 1) Medicare reimbursement cuts, as Medicare accounts for 65.5% of revenue, which could significantly impact earnings. 2) High debt levels, with a debt-to-equity ratio of 1.11x, increasing vulnerability to interest rate hikes. 3) Competitive pressures in the post-acute care market, which could erode market share. 4) Macroeconomic downturns that reduce patient volumes. The most severe risk is a Medicare policy change, which could lead to a -20% or more decline in the stock price.
The 12-month forecast is bullish, with a base case target of $148.17 (average analyst target) and a bull case target of $155.00, representing 23.2% and 28.8% upside, respectively. The bear case target is $92.77 (52-week low), implying -22.9% downside. The base case has a 50% probability, assuming revenue growth of 8-9% and stable margins. The bull case (30% probability) assumes favorable Medicare policies and stronger growth, while the bear case (20% probability) involves reimbursement cuts or a recession. Overall, the most likely scenario is the base case, with the stock appreciating to around $148.
Based on a PEG ratio of 0.78x, EHC is undervalued relative to its growth rate, as a PEG below 1 typically indicates undervaluation. The trailing PE of 18.9x and forward PE of 18.0x are in line with the broader market, but the company's high gross margin of 95.7% and operating margin of 17.7% justify a premium. Compared to its own history, the stock is trading near the upper end of its 52-week range, but the valuation metrics suggest the market is not fully pricing in the growth potential. Overall, the stock is fairly valued to slightly undervalued.
Yes, EHC is a good stock to buy for investors seeking a growth stock with a reasonable valuation. The stock has a PEG ratio of 0.78x, indicating it is undervalued relative to its growth rate, and analysts have a Strong Buy consensus with an average target price of $148.17, implying 23.2% upside. However, the high debt-to-equity ratio and heavy reliance on Medicare are risks to consider. For long-term investors with a horizon of 3-5 years, the risk/reward is favorable, but short-term traders should be cautious given the stock's proximity to its 52-week high.
EHC is more suitable for long-term investment due to its stable growth profile and low beta of 0.6, which indicates lower volatility. The company's consistent revenue growth, driven by demographic trends, supports a long-term holding period of at least 3-5 years. The stock pays a modest dividend yield of 0.67%, providing some income, but the main return is expected from capital appreciation. Short-term trading is possible given the stock's volatility, but the high debt and regulatory risks make it less attractive for short-term speculation. Therefore, investors with a long-term horizon are likely to benefit most from EHC.