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Should The Ensign Group (ENSG) Stock Be in Your Portfolio?
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On Dec 21, 2016, Zacks Investment Research upgraded The Ensign Group, Inc. (ENSG - Free Report) to Zacks Rank #3 (Hold).
The stock has been gaining momentum recently. Shares of the Ensign Group have gained 0.97% year to date, compared with 13.38% lost by the Zacks categorized Nursing Homes industry. This outperformance was driven by the company’s strong underwriting results.
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The company’s revenues have been growing consistently since 2012. At the end of first nine months of 2016, revenues increased 26% over the prior-year period. We note that the company’s inorganic growth strategies have been boosting its revenue base. With numerous acquisitions, the Ensign Group has sharpened its expertise both clinically and financially. From 2008 through 2014, it acquired 76 facilities, which added 7,884 operational beds to its operating subsidiaries. In 2015, it made the highest number of acquisitions in its history with 68 transactions. During the first nine months of 2016, the company added two home health agencies and four hospice agencies along with acquiring 19 stand-alone skilled nursing operations.
The company is renowned for providing quality healthcare at a low cost alongside other integrated services. It operates through service centers instead of maintaining corporate headquarters to support each operation. This strategy bolsters the company’s strength, synergies and economies of scale. Also, continuous investment in information technology helps it upgrade and innovate specialized healthcare to enhance its operational excellence further.
However, Donald Trump’s intention to repeal and replace the Affordable Care Act (ACA) has shrouded the future for the hospital sector in uncertainty. The ACA has substantially benefitted the hospital industry by increasing the number of medically insured members, in turn, lowering bad debts. Hence, Trump’s policies might result in the hospital industry losing membership and bear a bigger burden of bad debts that might ultimately put pressure on margins.
The company has been unable to generate sufficient cash flow to cover the required payments or fulfilling other operational needs. Hence, it has opted for long-term debt financing, which poses a risk of default or raising further debt. As of Sep 30, 2016, the company’s total long-term debt of $162.5 million reflected 64% increase over year-end 2015. We note that The Ensign Group requires to strike a balance between its financing options to reduce its interest expenses and risk of insolvency.
The company also remains burdened with higher general and administrative expenses and cost of services exclusive of rent, depreciation and amortization. The company needs to undertake cost-containment initiatives to avoid pressure on margins in the future. In the first nine months of 2016, total expenses have increased 29.6% over the last-year period.
Stocks to Consider
Some better-ranked stocks from the medical sector include WellCare Health Plans Inc. , Magellan Health Inc. and UnitedHealth Group Inc. (UNH - Free Report)
Magellan delivered positive surprise in three of the last four quarters with an average beat of 42.58%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare delivered positive surprises in all of the last four quarters with an average beat of 40.01%. The company also has a Zacks Rank #1.
UnitedHealth delivered positive surprise in three of the last four quarters with an average beat of 3.86%. It carries a Zacks Rank #2
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Should The Ensign Group (ENSG) Stock Be in Your Portfolio?
On Dec 21, 2016, Zacks Investment Research upgraded The Ensign Group, Inc. (ENSG - Free Report) to Zacks Rank #3 (Hold).
The stock has been gaining momentum recently. Shares of the Ensign Group have gained 0.97% year to date, compared with 13.38% lost by the Zacks categorized Nursing Homes industry. This outperformance was driven by the company’s strong underwriting results.
YTD PRICE CHART
The company’s revenues have been growing consistently since 2012. At the end of first nine months of 2016, revenues increased 26% over the prior-year period. We note that the company’s inorganic growth strategies have been boosting its revenue base. With numerous acquisitions, the Ensign Group has sharpened its expertise both clinically and financially. From 2008 through 2014, it acquired 76 facilities, which added 7,884 operational beds to its operating subsidiaries. In 2015, it made the highest number of acquisitions in its history with 68 transactions. During the first nine months of 2016, the company added two home health agencies and four hospice agencies along with acquiring 19 stand-alone skilled nursing operations.
The company is renowned for providing quality healthcare at a low cost alongside other integrated services. It operates through service centers instead of maintaining corporate headquarters to support each operation. This strategy bolsters the company’s strength, synergies and economies of scale. Also, continuous investment in information technology helps it upgrade and innovate specialized healthcare to enhance its operational excellence further.
However, Donald Trump’s intention to repeal and replace the Affordable Care Act (ACA) has shrouded the future for the hospital sector in uncertainty. The ACA has substantially benefitted the hospital industry by increasing the number of medically insured members, in turn, lowering bad debts. Hence, Trump’s policies might result in the hospital industry losing membership and bear a bigger burden of bad debts that might ultimately put pressure on margins.
The company has been unable to generate sufficient cash flow to cover the required payments or fulfilling other operational needs. Hence, it has opted for long-term debt financing, which poses a risk of default or raising further debt. As of Sep 30, 2016, the company’s total long-term debt of $162.5 million reflected 64% increase over year-end 2015. We note that The Ensign Group requires to strike a balance between its financing options to reduce its interest expenses and risk of insolvency.
The company also remains burdened with higher general and administrative expenses and cost of services exclusive of rent, depreciation and amortization. The company needs to undertake cost-containment initiatives to avoid pressure on margins in the future. In the first nine months of 2016, total expenses have increased 29.6% over the last-year period.
Stocks to Consider
Some better-ranked stocks from the medical sector include WellCare Health Plans Inc. , Magellan Health Inc. and UnitedHealth Group Inc. (UNH - Free Report)
Magellan delivered positive surprise in three of the last four quarters with an average beat of 42.58%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare delivered positive surprises in all of the last four quarters with an average beat of 40.01%. The company also has a Zacks Rank #1.
UnitedHealth delivered positive surprise in three of the last four quarters with an average beat of 3.86%. It carries a Zacks Rank #2
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>