The Ensign Group, Inc. ENSG is benefiting from improving service revenues, a series of acquisitions and sufficient cash-generating abilities. An optimistic 2023 business outlook also reinforces investors’ confidence in the stock.
Zacks Rank & Price Performance
Ensign Group carries a Zacks Rank #3 (Hold) at present.
The stock has gained 14.2% in the past six months compared with the industry’s 6.5% growth. The Medical sector and the S&P 500 composite index have increased 6.6% and 9.6%, respectively, in the same time frame.
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Favorable Style Score
ENSG is well-poised for progress, as evidenced by its impressive VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of all three factors.
Robust Growth Prospects
The Zacks Consensus Estimate for Ensign Group’s 2023 earnings is pegged at $4.68 per share, indicating an improvement of 13% from the year-earlier reading, while the same for revenues stands at $3.6 billion, implying a 18.4% increase from the prior-year actual.
The consensus mark for 2024 earnings is pegged at $5.13 per share, suggesting 9.7% growth from the 2023 estimate. The same for revenues stands at $3.8 billion, which indicates a rise of 7.2% from the 2023 estimate.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2023 earnings has been revised upward by 1.3% in the past 30 days.
Decent Surprise History
ENSG’s earnings outpaced estimates in one of the trailing four quarters, matched the mark twice and missed the same on the remaining one occasion, the average being 0.55%.
Solid Return on Equity
Ensign Group’s efficiency in utilizing shareholders’ funds can be substantiated by its return on equity of 19.3% as of Dec 31, 2022, against the industry’s negative return of 19.6%.
A Favorable 2023 Outlook
ENSG anticipates revenues within $3.55-$3.62 billion in 2023, the midpoint of which indicates 18.5% growth from the 2022 reported figure.
Adjusted earnings per share are estimated to lie between $4.60 and $4.74 this year. The midpoint of the outlook suggests 12.8% growth from the 2022 reported figure.
Key Business Tailwinds
Revenues of Ensign Group are driven by growing service revenues derived from rendering enhanced healthcare services at its skilled nursing, rehabilitation and senior living facilities. As a result, the top line has witnessed a 13.9% CAGR over the past decade (2012-2022).
An aging U.S. population is likely to sustain the solid demand for ENSG’s senior living services in the days ahead, while the dire need for effective rehabilitation services that empower individuals to resume daily life activities is expected to provide an impetus to its service revenues.
The solid performance of ENSG’s Skilled Services and Standard Bearer segments also contributes to revenue growth. Through the Standard Bearer unit, it earns rental revenues from leasing the post-acute care properties that it had purchased to healthcare operators under triple-net lease arrangements. ENSG stands out as a gainer in such agreements for not only does the company receives rental revenues but also the tenant bears costs related to the abovementioned properties.
The inorganic growth strategy of Ensign Group looks impressive. The company is on a spree to acquire facilities situated in different U.S. regions and benefits from the opportunity to work with a local team of caregivers. This provides ENSG with in-depth understanding of the diversified regional needs and enables it to extend high-quality healthcare services to communities with inadequate care access.
Such an active pursuit of growth initiatives expands the healthcare portfolio and nationwide presence of Ensign Group. It presently operates 290 healthcare facilities across 13 U.S. states. ENSG also owns 108 real-estate assets. Noteworthy, acquisitions remain a top priority for the management while deploying capital.
For undertaking uninterrupted business investments, a solid financial position remains a compulsion. The same is the case with Ensign Group, which boasts of solid cash reserves and adequate cash-generating abilities. Such financial strengths also instill confidence in ENSG in rewarding shareholders with share buybacks and dividend payments. Its dividend yield of 0.3% compares favorably with the industry’s figure of 0.3%.
Stocks to Consider
Some top-ranked stocks in the Medical space are Novo Nordisk A/S NVO, Humana Inc. HUM and Chemed Corporation CHE. While Novo Nordisk sports a Zacks Rank #1 (Strong Buy), Humana and Chemed carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Novo Nordisk’s earnings surpassed estimates in three of the last four quarters and missed the mark once, the average being 3.00%. The Zacks Consensus Estimate for NVO’s 2023 earnings indicates a 29.5% rise, while the same for revenues suggests an improvement of 19.5% from the respective prior-year tallies. The consensus mark for NVO’s 2023 earnings has moved 3% north in the past 30 days.
The bottom line of Humana outpaced estimates in each of the trailing four quarters, the average being 12.95%. The Zacks Consensus Estimate for HUM’s 2023 earnings indicates a 11.2% rise, while the same for revenues suggests an improvement of 11.5% from the respective prior-year figures. The consensus mark for HUM’s 2023 earnings has moved 0.4% north in the past 60 days.
Chemed’s earnings outpaced estimates in each of the trailing four quarters, the average being 3.12%. The Zacks Consensus Estimate for CHE’s 2023 earnings indicates a 5.6% rise, while the same for revenues suggests an improvement of 4.7% from the respective prior-year tallies. The consensus mark for CHE’s 2023 earnings has moved up 0.9% in the past 30 days.
Shares of Novo Nordisk and Chemed have gained 54.2% and 18%, respectively, in the past six months. However, the Humana stock has lost 2.3% in the same time frame.
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