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Compelling Reasons to Hold on to Ensign Group Stock Now
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The Ensign Group, Inc. (ENSG - Free Report) is benefiting from improved service revenues, a series of acquisitions and a strong financial position. An optimistic 2024 business outlook also reinforces investors’ confidence in the stock.
Zacks Rank & Price Performance
Ensign Group carries a Zacks Rank #3 (Hold) at present.
The stock has gained 33.3% in the past year compared with the industry’s 24.6% growth. The Medical sector and the S&P 500 composite index have increased 2.5% and 30%, respectively, in the same time frame.
Image Source: Zacks Investment Research
Favorable Style Score
ENSG is well-poised for progress, as evidenced by its impressive VGM Score of A. Here, V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three factors.
Robust Growth Prospects
The Zacks Consensus Estimate for Ensign Group’s 2024 earnings is pegged at $5.48 per share, indicating an improvement of 14.9% from the year-earlier reading, while the same for revenues is $4.3 billion, implying an 14% increase from the prior-year actual.
The consensus mark for 2025 earnings is pegged at $6.06 per share, indicating 10.5% growth from the 2024 estimate. The same for revenues stands at $4.7 billion, which indicates a rise of 11% from the 2024 estimate.
Impressive Surprise History
ENSG’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 1.34%.
Solid Return on Equity
Ensign Group’s efficiency in utilizing shareholders’ funds can be substantiated by its return on equity of 18.9% as of Sept. 30, 2024, against the industry’s negative return of 15.2%.
A Favorable 2024 Outlook
ENSG anticipates revenues within the range of $4.25-$4.26 billion in 2024, the midpoint of which indicates 14.1% growth from the 2023 reported figure.
Adjusted earnings per share are estimated to lie between $5.46 and $5.52 this year. The midpoint of the outlook indicates 15.1% growth from the 2023 reported figure.
Key Business Tailwinds
Ensign Group's revenue growth is primarily fueled by rising service revenues from its advanced healthcare offerings at skilled nursing, rehabilitation, and senior living facilities. The aging U.S. population is expected to sustain the robust demand for ENSG's senior living services. Additionally, the growing need for effective rehabilitation services, which assist individuals in resuming daily activities, is projected to drive revenue growth in the company's Skilled Services segment.
The strong performance of Ensign's Standard Bearer segment further boosts revenue. Through the Standard Bearer unit, the company generates rental income by leasing post-acute care properties, which it owns, to healthcare operators under triple-net lease agreements. These arrangements benefit Ensign Group by not only providing rental revenues but also shifting property-related expenses to the tenants.
Ensign Group’s growth strategy, focused on acquisitions, is noteworthy. The company actively acquires facilities in various U.S. regions, fostering collaborations with local caregiving teams. This localized approach enables Ensign to understand regional healthcare needs better and deliver high-quality services to underserved communities.
In November 2024, ENSG expanded its portfolio by acquiring the real estate and operations of a Wisconsin-based 82-bed skilled nursing facility. These strategic acquisitions enhance Ensign's healthcare portfolio and national footprint. Currently, the company operates 325 healthcare facilities across 14 states and owns 128 real estate assets. Acquisitions remain a top priority for management in its capital allocation strategy.
To sustain its ongoing investments, maintaining a strong financial foundation is crucial. Ensign Group benefits from substantial cash reserves and adequate cash generation abilities. These financial strengths also support shareholder returns through share buybacks and dividends. The company has consistently increased its dividend payments for 21 consecutive years, demonstrating a commitment to rewarding shareholders.
ENSG’s Key Risks
The company has faced a persistent rise in expenses. Expenses rose 14.1% year over year in the first nine months of 2024, posing risks to profit margins as costs are expected to climb further with higher utilization rates and lingering labor market volatility. Additionally, the nursing home sector's oversupply of facilities and intensified competition from new market entrants could pressure pricing and profitability further.
Stocks to Consider
Some better-ranked stocks in the Medical space are Pediatrix Medical Group, Inc. (MD - Free Report) , ANI Pharmaceuticals, Inc. (ANIP - Free Report) and Encompass Health Corporation (EHC - Free Report) . While Pediatrix sports a Zacks Rank #1 (Strong Buy), ANI Pharmaceuticals and Encompass Health carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Pediatrix’s earnings surpassed estimates in three of the last four quarters and matched the mark once, the average surprise being 9.93%. The Zacks Consensus Estimate for MD’s 2024 earnings indicates a 7.1% rise, while the same for revenues implies an improvement of 0.1% from the respective prior-year figures. The consensus mark for MD’s earnings has moved 5.5% north in the past 30 days.
The bottom line of ANI Pharmaceuticals outpaced estimates in each of the trailing four quarters, the average surprise being 20.27%. The Zacks Consensus Estimate for ANIP’s 2024 earnings indicates a 6.6% rise, while the same for revenues implies an improvement of 23% from the respective prior-year figures. The consensus mark for ANIP’s earnings has moved 7.5% north in the past 30 days.
Encompass Health’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 13.59%. The Zacks Consensus Estimate for EHC’s 2024 earnings indicates a 17.6% rise, while the same for revenues implies an improvement of 11.2% from the respective prior-year tallies. The consensus mark for EHC’s earnings has moved up 2.4% in the past 30 days.
Shares of Pediatrix, ANI Pharmaceuticals and Encompass Health have gained 65.8%, 6.7% and 51.1%, respectively, in the past year.
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Compelling Reasons to Hold on to Ensign Group Stock Now
The Ensign Group, Inc. (ENSG - Free Report) is benefiting from improved service revenues, a series of acquisitions and a strong financial position. An optimistic 2024 business outlook also reinforces investors’ confidence in the stock.
Zacks Rank & Price Performance
Ensign Group carries a Zacks Rank #3 (Hold) at present.
The stock has gained 33.3% in the past year compared with the industry’s 24.6% growth. The Medical sector and the S&P 500 composite index have increased 2.5% and 30%, respectively, in the same time frame.
Image Source: Zacks Investment Research
Favorable Style Score
ENSG is well-poised for progress, as evidenced by its impressive VGM Score of A. Here, V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three factors.
Robust Growth Prospects
The Zacks Consensus Estimate for Ensign Group’s 2024 earnings is pegged at $5.48 per share, indicating an improvement of 14.9% from the year-earlier reading, while the same for revenues is $4.3 billion, implying an 14% increase from the prior-year actual.
The consensus mark for 2025 earnings is pegged at $6.06 per share, indicating 10.5% growth from the 2024 estimate. The same for revenues stands at $4.7 billion, which indicates a rise of 11% from the 2024 estimate.
Impressive Surprise History
ENSG’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 1.34%.
Solid Return on Equity
Ensign Group’s efficiency in utilizing shareholders’ funds can be substantiated by its return on equity of 18.9% as of Sept. 30, 2024, against the industry’s negative return of 15.2%.
A Favorable 2024 Outlook
ENSG anticipates revenues within the range of $4.25-$4.26 billion in 2024, the midpoint of which indicates 14.1% growth from the 2023 reported figure.
Adjusted earnings per share are estimated to lie between $5.46 and $5.52 this year. The midpoint of the outlook indicates 15.1% growth from the 2023 reported figure.
Key Business Tailwinds
Ensign Group's revenue growth is primarily fueled by rising service revenues from its advanced healthcare offerings at skilled nursing, rehabilitation, and senior living facilities. The aging U.S. population is expected to sustain the robust demand for ENSG's senior living services. Additionally, the growing need for effective rehabilitation services, which assist individuals in resuming daily activities, is projected to drive revenue growth in the company's Skilled Services segment.
The strong performance of Ensign's Standard Bearer segment further boosts revenue. Through the Standard Bearer unit, the company generates rental income by leasing post-acute care properties, which it owns, to healthcare operators under triple-net lease agreements. These arrangements benefit Ensign Group by not only providing rental revenues but also shifting property-related expenses to the tenants.
Ensign Group’s growth strategy, focused on acquisitions, is noteworthy. The company actively acquires facilities in various U.S. regions, fostering collaborations with local caregiving teams. This localized approach enables Ensign to understand regional healthcare needs better and deliver high-quality services to underserved communities.
In November 2024, ENSG expanded its portfolio by acquiring the real estate and operations of a Wisconsin-based 82-bed skilled nursing facility. These strategic acquisitions enhance Ensign's healthcare portfolio and national footprint. Currently, the company operates 325 healthcare facilities across 14 states and owns 128 real estate assets. Acquisitions remain a top priority for management in its capital allocation strategy.
To sustain its ongoing investments, maintaining a strong financial foundation is crucial. Ensign Group benefits from substantial cash reserves and adequate cash generation abilities. These financial strengths also support shareholder returns through share buybacks and dividends. The company has consistently increased its dividend payments for 21 consecutive years, demonstrating a commitment to rewarding shareholders.
ENSG’s Key Risks
The company has faced a persistent rise in expenses. Expenses rose 14.1% year over year in the first nine months of 2024, posing risks to profit margins as costs are expected to climb further with higher utilization rates and lingering labor market volatility. Additionally, the nursing home sector's oversupply of facilities and intensified competition from new market entrants could pressure pricing and profitability further.
Stocks to Consider
Some better-ranked stocks in the Medical space are Pediatrix Medical Group, Inc. (MD - Free Report) , ANI Pharmaceuticals, Inc. (ANIP - Free Report) and Encompass Health Corporation (EHC - Free Report) . While Pediatrix sports a Zacks Rank #1 (Strong Buy), ANI Pharmaceuticals and Encompass Health carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Pediatrix’s earnings surpassed estimates in three of the last four quarters and matched the mark once, the average surprise being 9.93%. The Zacks Consensus Estimate for MD’s 2024 earnings indicates a 7.1% rise, while the same for revenues implies an improvement of 0.1% from the respective prior-year figures. The consensus mark for MD’s earnings has moved 5.5% north in the past 30 days.
The bottom line of ANI Pharmaceuticals outpaced estimates in each of the trailing four quarters, the average surprise being 20.27%. The Zacks Consensus Estimate for ANIP’s 2024 earnings indicates a 6.6% rise, while the same for revenues implies an improvement of 23% from the respective prior-year figures. The consensus mark for ANIP’s earnings has moved 7.5% north in the past 30 days.
Encompass Health’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 13.59%. The Zacks Consensus Estimate for EHC’s 2024 earnings indicates a 17.6% rise, while the same for revenues implies an improvement of 11.2% from the respective prior-year tallies. The consensus mark for EHC’s earnings has moved up 2.4% in the past 30 days.
Shares of Pediatrix, ANI Pharmaceuticals and Encompass Health have gained 65.8%, 6.7% and 51.1%, respectively, in the past year.