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Why Should You Add Ensign Group (ENSG) to Portfolio Now?

·5 min read

The Ensign Group, Inc. ENSG remains well-poised for growth, thanks to solid service revenues, numerous facility buyouts, strong financial guidance for 2022 and a credible financial position.

Top Zacks Rank & Upbeat Price Performance

Ensign Group carries a Zacks Rank #2 (Buy), currently.

The stock has rallied 4.2% in the past six months against the industry’s decline of 2.7%. The Zacks Medical sector and the S&P 500 composite have lost 7.4% and 3.4%, respectively.

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Favorable Style Score

Ensign Group carries an impressive Value Score of A. Value Score helps find stocks that are undervalued. Back-tested results have shown so far that stocks with a favorable Value Score, combined with a solid Zacks Rank, are the best investment bets.

Robust Prospects

The Zacks Consensus Estimate for ENSG’s 2022 earnings is pegged at $4.12  per share, suggesting growth of 13.2%, while the same for revenues stands at $3 billion, implying a rise of 13% from the respective year-ago reported figures. The consensus mark for 2023 earnings stands at $4.58 per share, indicating an improvement of 11.3%, while the same for revenues stands at $3.2 billion, hinting at a 9.3% increase from the respective year-ago reported numbers.

Sound Earnings Surprise History

Ensign Group boasts of a strong earnings surprise record. ENSG’s bottom line outpaced estimates in three of the trailing four quarters and matched the mark once, the average surprise being 1.32%.

Valuation: Cheaply Priced

Price-to-earnings (P/E) is one of the multiples used for valuing the healthcare stocks. Compared with the medical-nursing homes industry’s trailing 12-month P/E ratio of 157.1, Ensign Group has a reading of 21. It is quite evident that the stock is currently undervalued.

Solid 2022 Outlook

Ensign Group forecasts revenues within $2.96-$3 billion in 2022, the midpoint estimated 14.6% growth from the 2021 reported figure.

Earnings per share are anticipated between $4.05 and $4.15 this year. The midpoint of the outlook suggests a 13% increase from the reported figure of 2021.

Key Business Tailwinds

Revenues of Ensign Group continue to benefit from higher service revenues that usually contribute the maximum to its top line. Service revenues are derived from extending healthcare services to Medicaid and Medicare health plan members.

Solid performance of ENSG’s Skilled Services and Standard Bearer segments also contributes to revenue growth. In fact, an aging U.S. population will continue to boost demand for senior living services provided by Ensign Group.

Pursuit of multiple facility buyouts reinforces ENSG’s aggressive approach to the inorganic growth route. Apart from bolstering its healthcare portfolio and strengthening its U.S. foothold, each facility buyout enables it to extend its high-quality healthcare services. This is possible only by working closely with a credible team of caregivers at each of the facilities and subsequently, gaining in-depth knowledge about the local communities to serve them better.

As of Jun 30, 2022, Ensign Group’s portfolio stands at 259 healthcare operations, encompassing 26 senior-living operations across 13 states. ENSG also owns 106 real-estate assets. A solid pipeline of activities remains in the days ahead,

Ensign Group has a healthy balance sheet and comprises cash reserves sufficient to service short-term debt obligations. Its total debt-to-total capital of 12.2% at the second-quarter end compares favorably with its industry average of 83.9%. Also, ENSG’s times interest earned ratio of 33.4 at the second-quarter end is higher than the industry’s figure of 0.9, which implies that its earnings are sufficient to cover its interest obligations.

Solid cash-generating abilities empower Ensign Group to engage in growth-related investments or tactically deploy capital via share buybacks and dividend payments. Its dividend yield of 0.3% compares favorably with the industry’s figure of 0.2%.

Other Stocks to Consider

Some other top-ranked stocks in the Medical space are ShockWave Medical, Inc. SWAV, Lantheus Holdings, Inc. LNTH and AMN Healthcare Services, Inc. AMN, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ShockWave Medical’s earnings surpassed estimates in each of the last four quarters, the average being 180.14%. The Zacks Consensus Estimate for SWAV’s 2022 earnings is pegged at $2.57 per share. A loss of 26 cents was reported in the prior year. The consensus mark for SWAV’s 2022 earnings has moved 27.2% north in the past 60 days.

Lantheus’ earnings beat estimates in each of the trailing four quarters, the average being 54.60%. The Zacks Consensus Estimate for LNTH’s 2022 earnings is pegged at $3.57 per share, indicating an increase of more than seven-fold from the prior-year reading. The consensus mark for LNTH’s 2022 earnings has moved 15.9% north in the past 60 days.

The bottom line of AMN Healthcare outpaced estimates in each of the trailing four quarters, the average being 15.66%. The Zacks Consensus Estimate for AMN’s 2022 earnings indicates a rise of 40.2%, while the same for revenues suggests an improvement of 28.5% from the respective year-ago actuals. The consensus mark for AMN’s 2022 earnings has moved 0.9% north in the past 30 days.

Shares of ShockWave Medical, Lantheus and AMN Healthcare have gained 92.6%, 71.6% and 10.7%, respectively, in the past six months.

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AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report
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ShockWave Medical, Inc. (SWAV) : Free Stock Analysis Report
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