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Ensign Group (ENSG) Buys a 74-Bed Facility to Expand in Iowa

Zacks Equity Research

The Ensign Group, Inc. ENSG has acquired the Rehabilitation Center of Des Moines––a skilled nursing operation with 74 beds. The facility is subject to a long-term lease and the acquisition came into effect on Apr 1, 2017.

The acquisition marks Ensign Group’s sixth operation in Iowa.

Much of Ensign Group’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.

The latest acquisition brings Ensign Group's growing portfolio to 214 healthcare facilities, 20 hospice agencies, 17 home health agencies and three home care businesses across 14 states.

Its stock price also reflects inorganic growth efforts that have helped it to perform better then the sub industry. Though the company’s share price declined 14.6% in the past three years, it was still better off than the loss of 58% suffered by the Zacks categorized Medical - Nursing Homes industry.

In the last few years, the company’s acquisition activity accelerated. It added 108 facilities between Jan 1, 2012 and Dec 31, 2016. From Jan 1, 2008 through Dec 31, 2016, it acquired 149 facilities, which added 11,288 operational skilled nursing beds and 3,872 assisted and independent living units to its operating subsidiaries.

Last year, Ensign Group expanded its operations with the addition of two home  health  agencies and five hospice agencies. In addition, it acquired 18 stand-alone skilled nursing facilities and one post-acute care campus through a combination of long-term leases and purchases.

The company spent $64.5 million on acquisitions in 2016. In 2015 and 2014, the company spent nearly $120 million and $96 million, respectively, on buyouts.

Subsequent to Dec 31, 2016, the company acquired one skilled nursing and assisted living operation, which included real estate, for a purchase price of $5.8 million. This added 124 operational skilled nursing beds and nine assisted living units operated by its operating subsidiaries.

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

Last December, Universal Health Services, Inc. UHS acquired Cambian Group, PLC's Adult Services Division, which will significantly expand the company's market presence in the United Kingdom. Another company, Acadia Healthcare Company Inc. ACHC, recently took over Priory Group which added 327 facilities, making Acadia Healthcare one of the largest independent providers of mental health services in the U.K.

Zacks Rank & Key Player

Ensign Group carries a Zacks Rank #4 (Sell). A better-ranked player in the space is HCA Holdings, Inc. HCA. The stock carries a Zacks Rank #2 (Buy). It beat estimates in each of the last four reported quarters, with an average positive surprise of 10.2%. You can see the complete list of today’s Zacks #1 Rank stocks here

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