Encompass Health Corporation (EHC Quick QuoteEHC - Free Report) is a leading provider of inpatient rehabilitation services in the United States, specializing in facility-based patient care through a nationwide network of hospitals. The company focuses on helping patients recover from serious injuries, illnesses, or surgeries by delivering high-quality rehabilitation services within a coordinated care environment.

Encompass Health operates 173 inpatient rehabilitation hospitals across 39 U.S. states and Puerto Rico. The organization provides rehabilitation services aimed at supporting patient recovery and improving health outcomes.

Based in Bloomfield, AL, EHC has a market capitalization of approximately $10 billion. The company’s shares have gained 2.7% over the past year, underperforming the industry’s average 5.9% increase during the same period.
 

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Valuation of EHC

Its forward P/E ratio of 16.71x is also lower than the industry average of 17.51x, indicating relatively attractive valuation. Supported by solid prospects, EHC currently holds a Zacks Rank #3 (Hold) and a Value Score of B.

Zacks Estimates for EHC

The Zacks Consensus Estimate for 2026 earnings is pegged at $5.90 per share, suggesting an 8.3% year-over-year increase. Over the past month, estimates have seen one upward revision against no movement in the opposite direction. The consensus estimate for 2026 revenues is pinned at $6.4 billion, indicating 8.3% year-over-year growth. The company expects its 2026 revenues to reach $6.365–$6.465 billion, up from $5.9 billion in 2025.

Encompass beat earnings estimates in each of the trailing four quarters, with the average surprise being 12.1%.

EHC’s Key Growth Drivers

Encompass Health is focused on expanding its Inpatient Rehabilitation segment, which it considered a key growth driver. The company opened eight de novo hospitals with 395 beds in 2023 and seven hospitals with 427 beds in 2024. In 2025, it opened eight hospitals with 390 beds, launched a 50-bed satellite hospital, and added 127 beds to existing facilities. Between 2023 and 2027, Encompass Health plans to open six to 10 de novo hospitals annually and add 80-120 beds each year, further strengthening its rehabilitation network.

EHC has delivered solid revenue growth, driven largely by an expanding patient base at its inpatient rehabilitation hospitals. In 2025, the company reported a 10.5% year-over-year increase in revenues. It has shown steady growth in cash flow, reflecting strong operations and careful financial management. Net operating cash flow increased 17.9% in 2024 and 17.2% in 2025, reaching $1.2 billion. In 2025, the company generated $818 million in adjusted free cash flow, helping fund expansion projects without taking on excessive debt. This also reduces exposure to interest rate volatility and near-term refinancing risks.

The company continues to return value to shareholders through dividends and share buybacks. Last year, it paid $71.1 million in dividends. Also, it repurchased $158 million worth of shares, and as of Dec. 31, 2025, it had about $332 million remaining under its share repurchase authorization.

EHC boasts a favorable trailing 12-month return on invested capital (ROIC) of 10%, surpassing the industry average of 6.3%. This leverage indicates that the company is using its investments efficiently and creating more value.

EHC: Risks to Watch

Encompass Health faces potential reimbursement risk from Medicaid policy changes. In 2025, the company received about $148 million in state-directed and supplemental Medicaid payments while paying $127 million in provider taxes that help fund state Medicaid programs. Although enforcement of a new rule is currently paused pending a court appeal, additional federal provisions may limit provider taxes starting around 2027, creating uncertainty around future Medicaid-related payments.

EHC ended 2025 with $72.2 million in cash and $2.4 billion in long-term debt. This results in a net debt-to-capitalization ratio of 42.3%, slightly higher than the industry average of 38.1%, which could limit financial flexibility and expansion capacity.

Key Picks

While investors can maintain a Hold strategy for Encompass Health, they can consider some better-ranked stocks in the broader Medical space including USANA Health Sciences, Inc. (USNA Quick QuoteUSNA - Free Report) , InnovAge Holding Corp. (INNV Quick QuoteINNV - Free Report) and Enovis Corporation (ENOV Quick QuoteENOV - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for USANA Health’s 2026 earnings is pegged at $2 per share, which has witnessed one upward revision in the past 30 days, with no movement in the opposite direction. USNA beat earnings estimates in each of the trailing four quarters, with the average surprise being 21.9%. The 2026 revenue estimate is pegged at $942.4 million, implying 1.9% year-over-year growth, while earnings are expected to grow 3.6% year over year.

The Zacks Consensus Estimate for InnovAge Holding’s 2026 earnings is pegged at 25 cents per share, which has witnessed one upward revision in the past 30 days, with no movement in the opposite direction. INNV beat earnings estimates in thee of the trailing four quarters and missed once, with the average surprise being 87.5%. The consensus estimate for 2026 revenues is pinned at $944.5 million, implying 10.6% year-over-year growth.

The Zacks Consensus Estimate for Enovis’ 2026 earnings is pegged at $3.44 per share, which has witnessed one upward revisions in the past 30 days, with no movement in the opposite direction. ENOV beat earnings estimates in each of the trailing four quarters, with the average surprise being 11.4%. The consensus estimate for 2026 revenues is pinned at $2.3 billion, implying 4.3% year-over-year growth.