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Bull of the Day: The Ensign Group (ENSG)

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A Demographic Shift

It’s undeniable that the U.S. population is aging. This demographic shift will accelerate as increasing numbers of baby-boomers – those born between 1946 and 1964 – reach retirement age. The number of Americans aged 65 and older is projected to more than double from 46 million to over 95 million by 2060 when this age group will be approximately 25% of the population.

Americans are also living longer with life expectancy in the topping 79 years old, up from 68 just 50 years ago.

Unfortunately, some of the demographic trends are not positive, with higher rates of obesity and Alzheimer’s disease, along with higher rates of seniors who live alone due to divorce.

Demand for senior care services is rising steadily and there’s every reason to believe that trend will continue for the next several decades.

Demand for Health Services

The Ensign Group (ENSG - Free Report) is one of the nation’s leading providers of skilled care for aging individuals. The company offers a broad range of services that include inpatient/residential care, occupational and speech therapy, rehabilitation, hospice services and out-call home care for seniors.

Ensign operates 161 skilled nursing facilities, 51 assisted living facilities and 46 home health care businesses, primarily in the Western half of the country. The company receives 68% of its revenues from Medicare and Medicaid, 17% from managed care policies and the remaining 15% from all other sources, including private insurance.

In the senior-care sector, the U.S. Government is the best customer possible, making timely and predictable payments on a wide range of services.

After two recent positive earnings surprises, Investors are now focused on the company’s rising earnings estimates and the shares rallied nearly 30% in May. The Zacks Consensus Estimate for 2018 now stands at $1.86/share, a 35% increase over 2017. Four analyst upward revisions in the past 60 days earn ENSG a Zacks rank #1 (Strong Buy).

Intelligent Growth

Ensign has its eye on the future as well, regularly adding new facilities and acquiring existing, privately held skilled nursing operations and bringing them up to the standards of their first-class operation. The company is well-capitalized for growth with $35M in cash and equivalents on the balance sheet and an additional $169M in available credit, ensuring that they can continue to make strategic acquisitions as opportunities present themselves.


None of us care to think too much about the eventuality of growing older and requiring additional health care services, but there’s an undeniable demographic shift happening in the U.S. and wise investors would be well served to consider companies that are positioned to profit from it.


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