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Ensign Group (ENSG) Up 30.8% in 6 Months: More Growth Ahead?
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Shares of The Ensign Group, Inc (ENSG - Free Report) have jumped 30.8% in the past six months, outperforming the industry’s 13% increase. Based in San Juan Capistrano, CA, Ensign Group offers skilled nursing, senior living and rehabilitative services. It also owns real estate properties through the Standard Bearer unit. ENSG has a market cap of $7.1 billion.
In the past six months, the company’s shares also outperformed the 9.8% and 11.6% growth in the Medical sector and the S&P 500 Index, respectively. Growing skilled service revenues, skilled mix and improving occupancies are aiding its performance. It gains from the active inorganic growth strategy as the demand for healthcare-related services keeps rising.
The ingredients are there, and now let’s get into the details and show you how its estimates for the coming days stand.
The Zacks Consensus Estimate for Ensign Group’s 2024 full-year earnings is pegged at $5.35 per share, which indicates a 12.2% rise from $4.77 a year ago. It has witnessed two upward estimate revisions in the past month against no movement in the opposite direction. The company beat earnings estimates in each of the last four quarters, with an average surprise of 1.7%.
The consensus mark for full-year 2024 revenues stands at nearly $4.2 billion, which suggests an 11.2% rise from the prior-year reported number. Our model indicates significant increases in service revenues and rental revenues, which are likely to support top-line growth.
Growing strength in its Skilled Services unit is a major upside. We expect service revenues to rise 11% year over year in 2024. Further, we estimate its rental revenues to grow nearly 28% this year due to its Standard Bearer business strength. Its commendable skill lies in acquiring real estate or leasing post-acute care operations and then elevating them to become leaders in their respective markets through transformation.
ENSG employs a disciplined approach to acquisitions within a fragmented market to enhance its market share. Through its proactive acquisition strategy, it has expanded its portfolio to include 297 healthcare operations and owns 113 real estate assets.
In December 2023, the company increased its dividend to 6 cents per share. This marked the 21st consecutive year of dividend hikes for the company. Also, Ensign Group’s total debt is 9.1% of its capital, much lower than the industry’s average of 82%. Its solvency position remains strong.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on.
Rising expenses and higher valuation are major headwinds. Expenses increased 15.3% and 27.3% year over year in 2022 and 2023, respectively. We expect the metric to further jump 9.3% this year. This trend can affect its bottom line. Also, the stock’s forward 12-month price-to-sales ratio of 1.7 is higher than the industry average of 1.2, marking it slightly overvalued. Nevertheless, we believe that a systematic and strategic plan of action will drive long-term growth.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Universal Health Services, Inc. (UHS - Free Report) , The Cigna Group (CI - Free Report) and Health Catalyst, Inc. (HCAT - Free Report) , each carrying a Zacks Rank #2 at present.
The Zacks Consensus Estimate for Universal Health Services’ 2024 bottom line suggests 19.9% year-over-year growth. UHS has witnessed three upward estimate revisions over the past 30 days against one movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 5.9%.
The Zacks Consensus Estimate for Cigna’s full-year 2024 earnings indicates a 13% year-over-year increase. CI beat earnings estimates in each of the past four quarters, with an average surprise of 2.9%. The consensus mark for revenues predicts 20.4% growth from the year-ago period.
The Zacks Consensus Estimate for Health Catalyst’s 2024 full-year earnings implies a 93.3% increase from the year-ago reported figure. HCAT beat earnings estimates in each of the last four quarters, with an average surprise of 247.9%. The consensus mark for its current-year revenues is pegged at $308 million, which calls for a 4.1% year-over-year increase.
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Ensign Group (ENSG) Up 30.8% in 6 Months: More Growth Ahead?
Shares of The Ensign Group, Inc (ENSG - Free Report) have jumped 30.8% in the past six months, outperforming the industry’s 13% increase. Based in San Juan Capistrano, CA, Ensign Group offers skilled nursing, senior living and rehabilitative services. It also owns real estate properties through the Standard Bearer unit. ENSG has a market cap of $7.1 billion.
In the past six months, the company’s shares also outperformed the 9.8% and 11.6% growth in the Medical sector and the S&P 500 Index, respectively. Growing skilled service revenues, skilled mix and improving occupancies are aiding its performance. It gains from the active inorganic growth strategy as the demand for healthcare-related services keeps rising.
These factors are collectively contributing to this Zacks Rank #2 (Buy) company's notable price appreciation. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Can ENSG Retain Momentum?
The ingredients are there, and now let’s get into the details and show you how its estimates for the coming days stand.
The Zacks Consensus Estimate for Ensign Group’s 2024 full-year earnings is pegged at $5.35 per share, which indicates a 12.2% rise from $4.77 a year ago. It has witnessed two upward estimate revisions in the past month against no movement in the opposite direction. The company beat earnings estimates in each of the last four quarters, with an average surprise of 1.7%.
The consensus mark for full-year 2024 revenues stands at nearly $4.2 billion, which suggests an 11.2% rise from the prior-year reported number. Our model indicates significant increases in service revenues and rental revenues, which are likely to support top-line growth.
Growing strength in its Skilled Services unit is a major upside. We expect service revenues to rise 11% year over year in 2024. Further, we estimate its rental revenues to grow nearly 28% this year due to its Standard Bearer business strength. Its commendable skill lies in acquiring real estate or leasing post-acute care operations and then elevating them to become leaders in their respective markets through transformation.
ENSG employs a disciplined approach to acquisitions within a fragmented market to enhance its market share. Through its proactive acquisition strategy, it has expanded its portfolio to include 297 healthcare operations and owns 113 real estate assets.
In December 2023, the company increased its dividend to 6 cents per share. This marked the 21st consecutive year of dividend hikes for the company. Also, Ensign Group’s total debt is 9.1% of its capital, much lower than the industry’s average of 82%. Its solvency position remains strong.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on.
Rising expenses and higher valuation are major headwinds. Expenses increased 15.3% and 27.3% year over year in 2022 and 2023, respectively. We expect the metric to further jump 9.3% this year. This trend can affect its bottom line. Also, the stock’s forward 12-month price-to-sales ratio of 1.7 is higher than the industry average of 1.2, marking it slightly overvalued. Nevertheless, we believe that a systematic and strategic plan of action will drive long-term growth.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Universal Health Services, Inc. (UHS - Free Report) , The Cigna Group (CI - Free Report) and Health Catalyst, Inc. (HCAT - Free Report) , each carrying a Zacks Rank #2 at present.
The Zacks Consensus Estimate for Universal Health Services’ 2024 bottom line suggests 19.9% year-over-year growth. UHS has witnessed three upward estimate revisions over the past 30 days against one movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 5.9%.
The Zacks Consensus Estimate for Cigna’s full-year 2024 earnings indicates a 13% year-over-year increase. CI beat earnings estimates in each of the past four quarters, with an average surprise of 2.9%. The consensus mark for revenues predicts 20.4% growth from the year-ago period.
The Zacks Consensus Estimate for Health Catalyst’s 2024 full-year earnings implies a 93.3% increase from the year-ago reported figure. HCAT beat earnings estimates in each of the last four quarters, with an average surprise of 247.9%. The consensus mark for its current-year revenues is pegged at $308 million, which calls for a 4.1% year-over-year increase.