U.S. Markets close in 6 hrs 10 mins
  • S&P 500

    3,440.38
    +4.82 (+0.14%)
     
  • Dow 30

    28,228.47
    +17.65 (+0.06%)
     
  • Nasdaq

    11,517.50
    +32.81 (+0.29%)
     
  • Russell 2000

    1,612.61
    +8.83 (+0.55%)
     
  • Crude Oil

    40.49
    +0.46 (+1.15%)
     
  • Gold

    1,906.80
    -22.70 (-1.18%)
     
  • Silver

    24.84
    -0.40 (-1.59%)
     
  • EUR/USD

    1.1830
    -0.0037 (-0.3076%)
     
  • 10-Yr Bond

    0.8310
    +0.0150 (+1.84%)
     
  • Vix

    28.83
    +0.18 (+0.63%)
     
  • GBP/USD

    1.3098
    -0.0045 (-0.3458%)
     
  • USD/JPY

    104.7050
    +0.1450 (+0.1387%)
     
  • BTC-USD

    12,953.19
    +1,896.19 (+17.15%)
     
  • CMC Crypto 200

    261.49
    +5.39 (+2.11%)
     
  • FTSE 100

    5,771.32
    -5.18 (-0.09%)
     
  • Nikkei 225

    23,474.27
    -92.73 (-0.39%)
     

Is Ensign Group (ENSG) a Solid Growth Stock? 3 Reasons to Think " Yes "

Zacks Equity Research
·3 mins read

Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid returns. But finding a growth stock that can live up to its true potential can be a tough task.

In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end.

However, the task of finding cutting-edge growth stocks is made easy with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects.

Ensign Group (ENSG) is on the list of such stocks currently recommended by our proprietary system. In addition to a favorable Growth Score, it carries a top Zacks Rank.

Research shows that stocks carrying the best growth features consistently beat the market. And for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy), returns are even better.

While there are numerous reasons why the stock of this provider of nursing and rehabilitative care services is a great growth pick right now, we have highlighted three of the most important factors below:

Earnings Growth

Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.

While the historical EPS growth rate for Ensign Group is 14.6%, investors should actually focus on the projected growth. The company's EPS is expected to grow 13.7% this year, crushing the industry average, which calls for EPS growth of -66.2%.

Cash Flow Growth

Cash is the lifeblood of any business, but higher-than-average cash flow growth is more beneficial and important for growth-oriented companies than for mature companies. That's because, high cash accumulation enables these companies to undertake new projects without raising expensive outside funds.

Right now, year-over-year cash flow growth for Ensign Group is 18.2%, which is higher than many of its peers. In fact, the rate compares to the industry average of -7.3%.

While investors should actually consider the current cash flow growth, it's worth taking a look at the historical rate too for putting the current reading into proper perspective. The company's annualized cash flow growth rate has been 16.9% over the past 3-5 years versus the industry average of -6.5%.

Promising Earnings Estimate Revisions

Beyond the metrics outlined above, investors should consider the trend in earnings estimate revisions. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

There have been upward revisions in current-year earnings estimates for Ensign Group. The Zacks Consensus Estimate for the current year has surged 0.1% over the past month.

Bottom Line

While the overall earnings estimate revisions have made Ensign Group a Zacks Rank #2 stock, it has earned itself a Growth Score of A based on a number of factors, including the ones discussed above.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

This combination indicates that Ensign Group is a potential outperformer and a solid choice for growth investors.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
The Ensign Group, Inc. (ENSG) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research