Back to top

Ensign Group Surges 30% in May: Is Further Upside Left?

Read MoreHide Full Article
The Ensign Group, Inc. (ENSG - Free Report) has been in investors’ good books . The company’s strong operating first-quarter 2018 results, success in making some past acquisitions profitable, the recent buyouts and an encouraging earnings guidance drove its share price. 
 
The company’s operating efficiency and investors’ high expectations led the stock to surge a good 30%, more than double the industry’s growth of 13% in May 2018.
 
 
 
The stock’s performance looks all the more solid when compared with other companies’ report card in the same space. Shares of Five Star Quality Care, Inc. (FVE - Free Report) and Brookdale Senior Living Inc. (BKD - Free Report) gained 6.12% and 7.4% respectively, while the Capital Senior Living Corporation (CSU - Free Report) stock lost 7% in the month. 
 
Reason Behind the Rally 
 
The company experienced a dramatic improvement in its transitional and skilled services segment income of 45% year over year. It also experienced positive trends in occupancy with an increase of 415 basis points in its transitioning operations and 82 basis points in its same-store operations, both year over year.
 
Ensign Group is also adding value to its other lines of business including home health and hospice, assisted living, non-emergency medical transportation and other post-acute care services.
 
Investors are content with the company’s efforts in successfully turning around its operating performance through Legend and Shea acquisitions made in 2016 and 2014, respectively. The Legend portfolio saw an increase in top line by 11% and its EBIT skyrocketed 222%, both on a year-over-year basis during the first quarter of 2018. The company is confident that the Legend buildings will be solid contributors for many years to come. 
 
Furthermore, Ensign Group has been able to overcome a low star rating, low census  of Shea. At the time of acquisition, this operation was suffering a massive decline for many years and was experiencing some devastating operating losses. Several recuperating initiatives helped its occupancy rate soar above 92% from 50% during the buyout process.
 
Stakeholders are upbeat about the company’s 2018 annual earnings per share guidance of $1.80 and a $1.87 pershare. Overall, this projection represents a 31.1% improvement from the midpoint over last year’s bottom line. 
 
Is Further Upside Potential Left? 
 
We expect the company’s consolidation strategy to continue for boosting its growth. Moreover, the stock has seen the Zacks Consensus Estimate for current-year earnings being revised 1.1% upward over the last 60 days. 
 
The stock carries an impressive Value Score of A. Our research shows that stocks with a Value Style Score of A or B when combined with the company’s favorable Zacks Rank #2 (Buy) offer the best investment opportunities in the value stock space.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
 

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

 

 

 


More from Zacks Analyst Blog

You May Like