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Ensign Group (ENSG) Buyouts to Bolster Its Position in Texas

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  • ENSG
  • UHS

The Ensign Group, Inc. ENSG recently bought Sedona Trace Health and Wellness Center in Austin TX and Cedar Pointe Health and Wellness Center in Cedar TX. The transactions were effective Aug 1, 2021.

Purchase of these establishments enhances its presence in the Texas region. Per the terms of the deal, the real estate of the hospitals was purchased by CareTrust REIT, Inc. CTRE. The two hospitals were constructed in 2017 and were bought for approximately $32.5 million from the original developer. Those were an addition to one of the eight current staggered-term master lease pools shared between CareTrust and Ensign Group.

The transaction also helped both companies strengthen their relationship by adding 10 years to the lease term. The lease term also facilitates three five-year renewal options and CPI-based annual rent escalators.

Management thinks that these additions will aid the company to grow in both the short and the long term. Earlier this year, the company also acquired the operations of San Pedro Manor, a 150-bed skilled nursing facility located in San Antonio, TX to establish its dominance in the state.
Closure of the deal brings Ensign Group’s portfolio to comprise 242 healthcare operations, 22 of which also include senior-living operations. The company owns 95 real-estate assets.

Acquisition Story

Ensign Group has been on a buyout binge for skilled nursing hubs for many years now. It has a tradition of acquiring distressed healthcare operations that require a significant clinical, financial and cultural turnaround.

The company boasts a strong inorganic growth story with several acquisitions made in the past decade. Its historical growth is mainly driven by its expertise in taking over real estate or leasing post-acute care operations and transforming those into market leaders. With each acquisition, the company sharpened its capability, both clinically and financially.

Management at this currently Zacks Rank #3 (Hold) company is eager to utilize opportunities for purchasing real estate and lease skilled nursing, assisted living and other healthcare-related businesses that continue to perform well. This highlights its intention to sustain this momentum. It also strives to provide the necessary assistance to struggling healthcare businesses across the United States.

Price Performance

Shares of this company have gained 82.6% in a year’s time, underperforming its industry’s growth of 95.4% in the same time frame. However, we expect the stock to bounce back owing to growing revenues, an impressive inorganic growth profile and balance-sheet strength.

Zacks Investment Research
Zacks Investment Research


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Stocks to Consider

Some better-ranked stocks in the medical sector are HCA Healthcare, Inc. HCA and Universal Health Services, Inc. UHS, each currently holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

HCA Healthcare is the largest non-governmental operator of acute care hospitals in the United States. Headquartered in Nashville, TN, it operates hospitals and related healthcare entities. It came up with a trailing four-quarter earnings surprise of 11.65%, on average.

Universal Health Services owns and operates acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers. It managed to surpass estimates in all the trailing four quarters, the average being 29.01%.


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The Ensign Group, Inc. (ENSG) : Free Stock Analysis Report

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