Have you been paying attention to shares of The Ensign Group (ENSG)? Shares have been on the move with the stock up 2.2% over the past month. The stock hit a new 52-week high of $59.2 in the previous session. The Ensign Group has gained 51% since the start of the year compared to the 5.3% move for the Zacks Medical sector and the 30.1% return for the Zacks Medical - Nursing Homes industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 6, 2019, Ensign Group reported EPS of $0.55 versus consensus estimate of $0.54 while it missed the consensus revenue estimate by 1.27%.
For the current fiscal year, Ensign Group is expected to post earnings of $2.27 per share on $2.33 billion in revenues. This represents a 20.74% change in EPS on a 13.48% change in revenues. For the next fiscal year, the company is expected to earn $2.51 per share on $2.54 billion in revenues. This represents a year-over-year change of 10.72% and 9.01%, respectively.
Ensign Group may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Ensign Group has a Value Score of C. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 25.8X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 21.1X versus its peer group's average of 3.8X. Additionally, the stock has a PEG ratio of 1.72. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Ensign Group currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Ensign Group meets the list of requirements. Thus, it seems as though Ensign Group shares could have potential in the weeks and months to come.
How Does Ensign Group Stack Up to the Competition?
Shares of Ensign Group have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Medpace Holdings (MEDP), Magellan Health (MGLN), and Molina Healthcare (MOH), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 13% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Ensign Group, even beyond its own solid fundamental situation.
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