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The Ensign Group (ENSG) Buys 2 Nursing Facilities in Arizona

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The Ensign Group, Inc. (ENSG - Free Report) has acquired the real estate and operations of two skilled nursing facilities in Arizona.

These facilities include Desert Blossom Health and Rehabilitation Center, an 88-bed skilled nursing facility located in Mesa, AZ; and Pueblo Springs Rehabilitation Center, a 115-bed skilled nursing facility located in Tucson, AZ.

The acquisition was effective Sep 1, 2017.

With this acquisition, The Ensign Group will expand its portfolio to 229 facilities spread across 14 states. These include 63 owned, 21 hospice agencies, 18 home health agencies and three home care businesses.

The Ensign Group is quite bent on achieving growth via inorganic means. Much of the company’s historical growth can be attributed to its expertise in acquiring real estate or leasing both under-performing and well-performing post-acute care operations. Subsequently, the company applies its core operating know-how to improve upon each acquired operation, both clinically and financially.

Its stock price also reflects inorganic growth efforts that have aided its top-line growth. The company’s share price has gained 1.7% in the past one year, significantly outperforming the decline of 27% suffered by the industry it belongs to.

In the last few years, the company expedited its acquisition activity, having added 108 facilities between Jan 1, 2012 and Dec 31, 2016. It spent nearly $281 million on acquisitions from 2014-2016.

We expect to hear more acquisitions from the company going forward. Management disclosed that it is actively seeking additional opportunities to acquire real estate or to lease both well-performing and struggling skilled nursing, assisted living and other healthcare-related businesses across the United States.

The skilled nursing industry, in which the company operates, is large and highly fragmented, characterized predominantly by numerous local and regional providers. This fragmentation creates significant acquisition and consolidation opportunities.

The hospital industry is witnessing consolidation due to rising expenses, declining admissions, increasing bad debts and a flurry of regulatory actions. These are compelling the players to gain in scale for survival.  

Recently, another player in the same space HCA Holdings, Inc. (HCA - Free Report) announced that it will acquire Florida  hospital from Community Health Systems Inc. (CYH - Free Report) and three Houston hospitals from Tenet Healthcare Corp. (THC - Free Report) .

The Ensign Group carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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