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Ensign Boosts Skilled Nursing Facility With McCall Buyout

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The Ensign Group, Inc. (ENSG - Free Report) , has acquired the real estate and operations of McCall Rehabilitation and Care Center, a 40-bed skilled nursing facility located in McCall, ID. The acquisition came into effect on Jul 1, 2018.

This acquisition reflects the company’s efforts to deepen its reach in the skilled nursing space, which is enjoying huge demand from an aging U.S population.  Per the company, between 2010 and 2030, the number of individuals aged 65 plus is projected to nearly double from 39 million to 73 million, a growth rate nearly five times higher than the 17% increase expected for the total population. This demographic change provides the company with immense scope for growth.

Ensign Group has an established track of successful acquisitions. Much of its historical growth can be attributed to its expertise in acquiring real estate or leasing both under-performing and performing post-acute care operations, and transforming them into market leaders in clinical quality, staff competency, employee loyalty and financial performance.

With each acquisition, the company applies its core operating expertise to improve these operations, both clinically and financially. In years when pricing has been high, the company has focused on integration and improvement of its existing operating subsidiaries while limiting its acquisitions to strategically situated properties.

Over the last several years, the company’s acquisition activity accelerated, allowing it to add 169 facilities between Jan 1, 2008 and Dec 31, 2017, which added 12,434 operational skilled nursing beds and 4,433 assisted and independent living units to its operating subsidiaries.

Ensign's growing portfolio consists of 185 skilled nursing operations, 22 of which also include assisted living operations, 51 assisted and independent living operations, 22 hospice agencies, 20 home health agencies and four home care businesses and one office building across 15 states.  

The company also owns the real estate at 68 of its 236 healthcare operations. Last month, the company acquired an office building located in San Juan Capistrano, CA.  The acquisition was effective Jun 13, 2018.
These acquisitions have led to a revenue and EBIDTA CAGR of 16% and 17%, respectively, from 2007-2017.

We expect to hear about more of such deals since the company’s management stated that the organization is actively seeking opportunities to acquire real estate and lease both well-performing and struggling skilled nursing, assisted living and other healthcare-related businesses throughout the United States.

The company’s acquisition strategy is also aided by its strong balance sheet, with low leverage of 31.7% (net debt to capital) compared with the industry level of 101.9%.

In a year’s time the stock has gained 70.4% compared with the industry’s decline of 6.7%.

Ensign Group currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the healthcare space are:

WellCare Health Plans, Inc. (WCG - Free Report) with a Zacks Rank #2 (Buy). It is the provider of managed care services for government-sponsored health care programs. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for the current year has improved 2.3% over the last 60 days.

Triple-S Management Corp. (GTS - Free Report) carrying a Zacks Rank of 2 is the largest managed care company in Puerto Rico and offers a  broad portfolio of managed care and related products in the commercial, Medicare and Reform (similar to Medicaid) markets.

The Zacks Consensus Estimate for the current year has improved 2.7% over the last 60 days.

Humana Inc. (HUM - Free Report) with a Zacks Rank #2 is a provider of retail, group and specialty healthcare insurance services.

The Zacks Consensus Estimate for the current year has improved 0.4% over the last 60 days.

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