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4 Stocks to Watch in a Rapidly Shifting Outpatient Home Health Space
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The Zacks Medical - Outpatient and Home Healthcare industry has been witnessing a rapid shift toward digital healthcare treatment. In the past few years, there has been a significant rise in demand for telemedicine-focused online medical and artificial intelligence (AI)-powered technology services. The rising elderly global population is necessitating many healthcare companies that were traditionally not technology-based to provide technology-enabled services to survive in the market. Per a report by Grand View Research, the global home healthcare market was valued at $390.24 billion in 2023 and is anticipated to witness a CAGR of approximately 7.9% between 2024 and 2030. Another factor prompting these MedTech players to embrace digital healthcare is the skyrocketing healthcare costs.
On a positive note, rising dependence on telehealth and AI is likely to help the industry thrive in the near term. Quest Diagnostics Incorporated (DGX - Free Report) , Encompass Health Corporation (EHC - Free Report) , DaVita Inc. (DVA - Free Report) and The Pennant Group, Inc. (PNTG - Free Report) are likely to gain from the prospects.
Industry Description
The industry comprises companies that offer ambulatory care in an outpatient setting or at home. They use advanced medical technologies for diagnosis, treatment and rehabilitation services. The players include operators of HMO medical centers, kidney dialysis centers and other outpatient care centers. After navigating a tough pandemic era, the payers and providers have been seeing steady growth on the back of innovation in services. This buoys optimism about prospects over the next few years, although persistent inflation in consumer prices could dent the outlook. The potential for scaling up innovation, prompted by the pandemic’s pressure on the healthcare system, is an added plus. Also, the acceleration of value-based care models and the increasing application of technology across the healthcare industry are likely to continue in the long run.
Major Trends Shaping the Future of the Outpatient and Home Healthcare Industry
Aging Population: One of the primary drivers of the home healthcare market is the aging global population. As people live longer, there is a growing demand for services that cater to chronic disease management, rehabilitation and daily living assistance. The rising elderly population is expected to fuel the need for home healthcare services.
Cost Effectiveness: The primary advantage of outpatient clinics is cost-effectiveness. Outpatient medical care clinics do not retain patients for long hours (overnight) or charge exorbitantly. Modern-day outpatient clinics offer a broad spectrum of treatment and diagnostic options and even minor surgical procedures. Financial incentives like health plans and government program payment policies supporting services in lower-cost care settings have also been driving outpatient care.
Additionally, with value-based models of care steadily emerging as the future of healthcare, the shift from fee-for-service (FFS) to alternative payment models (APM) is an ongoing parallel trend. FFS will be crucial to care organizations as a benchmark through which providers can assess APM.
AI’s Dominant Role: AI has been a roaring success in healthcare. Outpatient companies prefer bots and automated techniques for managing health information. With the help of AI, hospitals have been achieving better outcomes, with patients receiving more efficient and personalized care. The outpatient industry has been generating huge profits from electronic health records (EHRs) and ePrescriptions.
Technological Advancements: Virtual assistants and chatbots can help patients by answering questions about their care and connecting them with the information they need to make more informed decisions about their care. Increasingly, they will interface with EHR systems and be used to book and schedule appointments. They can also help patients stay compliant by reminding them to take medications or exercise.
Home healthcare can gain from the benefits provided by Medicare (and several other payers), which comprise a broad range of services that can be delivered in a patient’s home, including post-operative and chronic wound care. Home healthcare has seen a surge in the utilization of the telehealth platform in response to the pandemic. With a rise in the elderly population and the increasing costs of in-person health care, the demand for home-based health care is on the rise. People with chronic illnesses and disabilities also require home-based care.
Staffing Shortages: The U.S. healthcare industry has been experiencing a severe shortage of workers at every level. Among support personnel, there is a laxity of home health aides. The increasing international migration of health workers may aggravate health workforce shortfalls, especially in low-income and lower-middle-income countries. Another reason for the acute staffing shortage is high burnout due to physical, emotional and mental exhaustion. Thus, these overworked employees are leaving the profession at an accelerating rate.
Tariff Impact: The newly imposed U.S. tariffs have significantly raised the cost of imported medical supplies, straining home healthcare providers that are already operating on tight margins. While aimed at boosting domestic production, immediate investments remain limited, and supply chain disruptions persist. As a result, home healthcare services face rising operational costs and product shortages, undermining supply reliability rather than strengthening it as originally intended.
Zacks Industry Rank
The Zacks Medical - Outpatient and Home Healthcare industry falls within the broader Zacks Medical sector. It has a Zacks Industry Rank #47, which places it in the top 19% of nearly 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates promising near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few outpatient home health stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry's Stock Market Performance
The industry has outperformed its sector, but has underperformed the S&P 500 Composite in the past year.
The industry has gained 6.8% over this period compared with the S&P 500’s 12.1% gain and the broader sector’s decline of 12%.
One Year Price Performance
Image Source: Zacks Investment Research
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E), commonly used for valuing medical stocks, the industry is currently trading at 19.8X compared with the S&P 500’s 22.3X and the sector’s 19X.
Over the last five years, the industry has traded as high as 25.3X and as low as 17.1X, with the median being at 20.2X, as the charts below show.
Price-to-Earnings Forward Twelve Months (F12M)
Image Source: Zacks Investment Research
Price-to-Earnings Forward Twelve Months (F12M)
Image Source: Zacks Investment Research
4 Outpatient and Home Healthcare Stocks to Watch Now
Quest Diagnostics: Quest Diagnostics, a well-known diagnostic information services provider, reported its first-quarter 2025 results in April. The company’s top line benefited from a rebound in demand in March, following weather-related disruptions earlier in the quarter. The growth was led by contributions from acquisitions and large enterprise accounts, as well as the robust uptake of Quest Diagnostics’ advanced diagnostics portfolio and expanded health plan access. DGX carries a Zacks Rank #2 (Buy).
For this Secaucus, NJ-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 9.2%. The same for earnings indicates an increase of 8.6%.
Image Source: Zacks Investment Research
Quest Diagnostics’ return on equity (ROE) of 15.1% compares favorably with the industry’s 7.9%.
Encompass Health: Encompass Health (a well-known owner and operator of inpatient rehabilitation hospitals) announced preliminary plans to build a freestanding, 50-bed inpatient rehabilitation hospital in North Las Vegas, NV (in June) and another in the master-planned community of Waterset in Apollo Beach, FL.
For this Birmingham, AL-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 9.5%. The same for earnings indicates an increase of 13.1%.
Image Source: Zacks Investment Research
Encompass Health’s ROE of 17.6% compares favorably with the industry’s 7.9%.
The Pennant Group: It is the parent company of the Pennant Group of affiliated home health, hospice and senior living companies. This month, The Pennant Group announced the acquisition of GrandCare Health Services, a premier home health agency. The newly acquired agency, to be known as GrandCare Home Health, is expected to provide services in Los Angeles, Orange, Riverside and San Diego counties in California, and broaden Pennant Group’s service area in the region. PNTG carries a Zacks Rank of 2.
For this Eagle, ID-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 23.3%. The same for earnings indicates an increase of 18.1%.
Image Source: Zacks Investment Research
Pennant Group’s ROE of 10.7% compares favorably with the industry’s 7.9%.
DaVita: DaVita, a renowned global comprehensive kidney care provider, reported its first-quarter 2025 results in May. The company registered an uptick in its top line and revenue per treatment. Solid dialysis patient service revenues and the per-day increase in total U.S. dialysis treatments for the first quarter on a sequential basis were also recorded. On the earnings call, management confirmed that DaVita is dispensing phosphate binders for physician orders and receiving reimbursement from CMS and Medicare Advantage plans on a per-script basis during the initial TDAPA period. Management sounded optimistic about the revenue contribution of these drugs to the company’s full-year operating income. DVA carries a Zacks Rank #3 (Hold).
For this Denver, CO-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 5.2%. The same for earnings indicates an increase of 11.2%.
Image Source: Zacks Investment Research
DaVita’s ROE of 176.1% compares favorably with the industry’s 7.9%.
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4 Stocks to Watch in a Rapidly Shifting Outpatient Home Health Space
The Zacks Medical - Outpatient and Home Healthcare industry has been witnessing a rapid shift toward digital healthcare treatment. In the past few years, there has been a significant rise in demand for telemedicine-focused online medical and artificial intelligence (AI)-powered technology services. The rising elderly global population is necessitating many healthcare companies that were traditionally not technology-based to provide technology-enabled services to survive in the market. Per a report by Grand View Research, the global home healthcare market was valued at $390.24 billion in 2023 and is anticipated to witness a CAGR of approximately 7.9% between 2024 and 2030. Another factor prompting these MedTech players to embrace digital healthcare is the skyrocketing healthcare costs.
On a positive note, rising dependence on telehealth and AI is likely to help the industry thrive in the near term. Quest Diagnostics Incorporated (DGX - Free Report) , Encompass Health Corporation (EHC - Free Report) , DaVita Inc. (DVA - Free Report) and The Pennant Group, Inc. (PNTG - Free Report) are likely to gain from the prospects.
Industry Description
The industry comprises companies that offer ambulatory care in an outpatient setting or at home. They use advanced medical technologies for diagnosis, treatment and rehabilitation services. The players include operators of HMO medical centers, kidney dialysis centers and other outpatient care centers. After navigating a tough pandemic era, the payers and providers have been seeing steady growth on the back of innovation in services. This buoys optimism about prospects over the next few years, although persistent inflation in consumer prices could dent the outlook. The potential for scaling up innovation, prompted by the pandemic’s pressure on the healthcare system, is an added plus. Also, the acceleration of value-based care models and the increasing application of technology across the healthcare industry are likely to continue in the long run.
Major Trends Shaping the Future of the Outpatient and Home Healthcare Industry
Aging Population: One of the primary drivers of the home healthcare market is the aging global population. As people live longer, there is a growing demand for services that cater to chronic disease management, rehabilitation and daily living assistance. The rising elderly population is expected to fuel the need for home healthcare services.
Cost Effectiveness: The primary advantage of outpatient clinics is cost-effectiveness. Outpatient medical care clinics do not retain patients for long hours (overnight) or charge exorbitantly. Modern-day outpatient clinics offer a broad spectrum of treatment and diagnostic options and even minor surgical procedures. Financial incentives like health plans and government program payment policies supporting services in lower-cost care settings have also been driving outpatient care.
Additionally, with value-based models of care steadily emerging as the future of healthcare, the shift from fee-for-service (FFS) to alternative payment models (APM) is an ongoing parallel trend. FFS will be crucial to care organizations as a benchmark through which providers can assess APM.
AI’s Dominant Role: AI has been a roaring success in healthcare. Outpatient companies prefer bots and automated techniques for managing health information. With the help of AI, hospitals have been achieving better outcomes, with patients receiving more efficient and personalized care. The outpatient industry has been generating huge profits from electronic health records (EHRs) and ePrescriptions.
Technological Advancements: Virtual assistants and chatbots can help patients by answering questions about their care and connecting them with the information they need to make more informed decisions about their care. Increasingly, they will interface with EHR systems and be used to book and schedule appointments. They can also help patients stay compliant by reminding them to take medications or exercise.
Home healthcare can gain from the benefits provided by Medicare (and several other payers), which comprise a broad range of services that can be delivered in a patient’s home, including post-operative and chronic wound care. Home healthcare has seen a surge in the utilization of the telehealth platform in response to the pandemic. With a rise in the elderly population and the increasing costs of in-person health care, the demand for home-based health care is on the rise. People with chronic illnesses and disabilities also require home-based care.
Staffing Shortages: The U.S. healthcare industry has been experiencing a severe shortage of workers at every level. Among support personnel, there is a laxity of home health aides. The increasing international migration of health workers may aggravate health workforce shortfalls, especially in low-income and lower-middle-income countries. Another reason for the acute staffing shortage is high burnout due to physical, emotional and mental exhaustion. Thus, these overworked employees are leaving the profession at an accelerating rate.
Tariff Impact: The newly imposed U.S. tariffs have significantly raised the cost of imported medical supplies, straining home healthcare providers that are already operating on tight margins. While aimed at boosting domestic production, immediate investments remain limited, and supply chain disruptions persist. As a result, home healthcare services face rising operational costs and product shortages, undermining supply reliability rather than strengthening it as originally intended.
Zacks Industry Rank
The Zacks Medical - Outpatient and Home Healthcare industry falls within the broader Zacks Medical sector. It has a Zacks Industry Rank #47, which places it in the top 19% of nearly 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates promising near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few outpatient home health stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry's Stock Market Performance
The industry has outperformed its sector, but has underperformed the S&P 500 Composite in the past year.
The industry has gained 6.8% over this period compared with the S&P 500’s 12.1% gain and the broader sector’s decline of 12%.
One Year Price Performance
Image Source: Zacks Investment Research
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E), commonly used for valuing medical stocks, the industry is currently trading at 19.8X compared with the S&P 500’s 22.3X and the sector’s 19X.
Over the last five years, the industry has traded as high as 25.3X and as low as 17.1X, with the median being at 20.2X, as the charts below show.
Price-to-Earnings Forward Twelve Months (F12M)
Image Source: Zacks Investment Research
Price-to-Earnings Forward Twelve Months (F12M)
Image Source: Zacks Investment Research
4 Outpatient and Home Healthcare Stocks to Watch Now
Quest Diagnostics: Quest Diagnostics, a well-known diagnostic information services provider, reported its first-quarter 2025 results in April. The company’s top line benefited from a rebound in demand in March, following weather-related disruptions earlier in the quarter. The growth was led by contributions from acquisitions and large enterprise accounts, as well as the robust uptake of Quest Diagnostics’ advanced diagnostics portfolio and expanded health plan access. DGX carries a Zacks Rank #2 (Buy).
For this Secaucus, NJ-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 9.2%. The same for earnings indicates an increase of 8.6%.
Image Source: Zacks Investment Research
Quest Diagnostics’ return on equity (ROE) of 15.1% compares favorably with the industry’s 7.9%.
Encompass Health: Encompass Health (a well-known owner and operator of inpatient rehabilitation hospitals) announced preliminary plans to build a freestanding, 50-bed inpatient rehabilitation hospital in North Las Vegas, NV (in June) and another in the master-planned community of Waterset in Apollo Beach, FL.
EHC presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For this Birmingham, AL-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 9.5%. The same for earnings indicates an increase of 13.1%.
Image Source: Zacks Investment Research
Encompass Health’s ROE of 17.6% compares favorably with the industry’s 7.9%.
The Pennant Group: It is the parent company of the Pennant Group of affiliated home health, hospice and senior living companies. This month, The Pennant Group announced the acquisition of GrandCare Health Services, a premier home health agency. The newly acquired agency, to be known as GrandCare Home Health, is expected to provide services in Los Angeles, Orange, Riverside and San Diego counties in California, and broaden Pennant Group’s service area in the region. PNTG carries a Zacks Rank of 2.
For this Eagle, ID-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 23.3%. The same for earnings indicates an increase of 18.1%.
Image Source: Zacks Investment Research
Pennant Group’s ROE of 10.7% compares favorably with the industry’s 7.9%.
DaVita: DaVita, a renowned global comprehensive kidney care provider, reported its first-quarter 2025 results in May. The company registered an uptick in its top line and revenue per treatment. Solid dialysis patient service revenues and the per-day increase in total U.S. dialysis treatments for the first quarter on a sequential basis were also recorded. On the earnings call, management confirmed that DaVita is dispensing phosphate binders for physician orders and receiving reimbursement from CMS and Medicare Advantage plans on a per-script basis during the initial TDAPA period. Management sounded optimistic about the revenue contribution of these drugs to the company’s full-year operating income. DVA carries a Zacks Rank #3 (Hold).
For this Denver, CO-based company, the Zacks Consensus Estimate for 2025 revenues suggests growth of 5.2%. The same for earnings indicates an increase of 11.2%.
Image Source: Zacks Investment Research
DaVita’s ROE of 176.1% compares favorably with the industry’s 7.9%.