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1. Company Snapshot

1.a. Company Description

Encompass Health Corporation provides facility-based and home-based post-acute healthcare services in the United States.The company operates in two segments, Inpatient Rehabilitation, and Home Health and Hospice.The Inpatient Rehabilitation segment provides specialized rehabilitative treatment on an inpatient and outpatient basis to patients who are recovering from conditions, such as stroke and other neurological disorders, cardiac and pulmonary conditions, brain and spinal cord injuries, complex orthopedic conditions, and amputations.


The Home Health and Hospice segment provides home health and hospice services primarily in the Southeast and Texas.Its home health services include a range of Medicare-certified home nursing services to adult patients in need of care comprising skilled nursing, medical social work, and home health aide services, as well as physical, occupational, speech therapy, and others.This segment's hospice services comprise in-home services to terminally ill patients and their families.


As of June 1, 2022, it operated 149 hospitals, 252 home health locations, and 99 hospice locations in 42 states and Puerto Rico.The company was formerly known as HealthSouth Corporation and changed its name to Encompass Health Corporation in January 2018.Encompass Health Corporation was founded in 1983 and is based in Birmingham, Alabama.

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1.b. Last Insights on EHC

Encompass Health Corporation faced negative drivers, including decreased stakes from various institutional investors, such as Advantage Alpha Capital Partners LP (52.7% reduction), Alps Advisors Inc. (18.0% reduction), and Copeland Capital Management LLC (11.3% reduction). Additionally, the company experienced a significant increase in short interest (19.7%) in December. However, recent earnings release showed positive results, with Q4 earnings of $1.46 per share beating estimates. The company also reported double-digit revenue growth and expanding EBITDA. Institutional investors like Braun Stacey Associates Inc. and Bahl & Gaynor Inc. increased their stakes.

1.c. Company Highlights

2. Encompass Health's Strong Q4 2025 Earnings Beat Expectations

Encompass Health reported a robust Q4 2025 performance, with revenue increasing 9.9% to $1.5 billion and adjusted EBITDA growing 15.9% to $335.6 million. The revenue growth was driven by a 5.3% increase in discharges and a 4.1% rise in net revenue per discharge. The company's adjusted earnings per share (EPS) came in at $1.46, beating analyst estimates of $1.29. For the full year 2025, revenue grew 10.5%, driven by 6% discharge growth and pricing growth, while EBITDA increased 14.9%. The company's strong financial performance was accompanied by a significant beat on labor costs, driven by softening labor markets and disciplined use of premium pay.

Publication Date: Feb -16

📋 Highlights
  • Revenue & EBITDA Growth:: Q4 revenue rose 9.9% to $1.5B; adjusted EBITDA surged 15.9% to $335.6M, driven by 5.3% discharge growth and 4.1% higher net revenue per discharge.
  • Full-Year 2025 Performance:: Annual revenue increased 10.5% to $5.99B; EBITDA grew 14.9% to $1.29B, supported by 6% discharge growth and pricing gains.
  • Expansion & Capacity:: Added 517 beds in 2025, including 390 via 8 new hospitals and 127 through existing hospital expansions.
  • 2026 Guidance:: Projects $6.365B–$6.465B net revenue and $1.34B–$1.38B adjusted EBITDA, with adjusted EPS of $5.81–$6.10, reflecting 7%–8% revenue growth.
  • Cost Efficiency & Dividends:: Q4 labor costs per FTE rose 2.1%, but premium labor costs fell $5.8M YoY; $158M in share repurchases and $70M+ in dividends returned in 2025.

Growth Drivers and Strategic Initiatives

The company's growth was fueled by the addition of 517 beds in 2025, with 390 beds added through 8 new hospitals and 127 beds added to existing hospitals. Encompass Health has a strategic relationship with Palantir, which has helped streamline admission documentation and enhance responses to claims denials. The company is also introducing a new small-format hospital prototype, a single-story, 24-bed chassis that can be built on 2 to 2.5 acres of land, expected to be operational by 2027. Management highlighted the company's ability to adapt to regulatory changes, including the extension of the Recovery Care Data (RCD) program and the implementation of the Team model.

Valuation and Outlook

With a P/E Ratio of 19.49 and an EV/EBITDA ratio of 9.32, the company's valuation appears reasonable given its strong growth prospects. Encompass Health's guidance for 2026 suggests net operating revenue of $6.365 billion to $6.465 billion, adjusted EBITDA of $1.34 billion to $1.38 billion, and adjusted EPS of $5.81 to $6.10, implying an 8.0% revenue growth. The company's strong balance sheet, with a year-end net financial leverage of 1.9x, and its commitment to returning capital to shareholders through share repurchases and dividend payments, are expected to support its growth trajectory.

Operational Highlights and Challenges

The company reported growth in various patient categories, including brain injury, cardiac, neuro, major trauma, and stroke. However, it also faced challenges related to Medicare Advantage rates, with a high single-digit increase in referrals but a decline in admissions. Encompass Health plans to take a more aggressive approach in appealing denials and is focused on leading with its outcomes data to demonstrate its value proposition to payers.

3. NewsRoom

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Encompass Health Rehabilitation Hospital of Irmo now open in South Carolina

Mar -03

Source: prnewswire.com

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Baron Health Care Fund Q4 2025 Contributors And Detractors

Mar -03

Source: seekingalpha.com

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Encompass Health to participate in Barclays Global Healthcare Conference

Feb -26

Source: prnewswire.com

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Encompass Health recognized for corporate excellence on Fortune and Forbes 2026 lists

Feb -24

Source: prnewswire.com

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NANO Nuclear Energy Signs Memorandum of Understanding with EHC Investment L.L.C to Advance Micro Modular Reactor Deployment in the UAE

Feb -24

Source: newsfilecorp.com

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Encompass Health declares dividend on common stock

Feb -19

Source: prnewswire.com

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Encompass Health announces plans to build a 50-bed inpatient rehabilitation hospital in Flowood, Mississippi

Feb -13

Source: prnewswire.com

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Enhabit and Encompass Health Collect $43.1 Million from Individual Defendants in Delaware Fiduciary Breach Case

Feb -12

Source: businesswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (0.81%)

6. Segments

Inpatient

Expected Growth: 0.8%

Inpatient segment growth of 0.8% from Encompass Health Corporation is driven by increasing demand for post-acute care services, expansion of existing facilities, and strategic acquisitions. Additionally, the company's focus on providing high-quality patient care and investing in technology to improve operational efficiency also contribute to this growth.

Outpatient and Other

Expected Growth: 1.2%

Outpatient and Other segment growth of 1.2% from Encompass Health Corporation is driven by increasing demand for home health and hospice services, expansion of Medicare Advantage plans, and strategic acquisitions. Additionally, the company's focus on value-based care and cost-effective services resonates with payers and patients, contributing to the segment's growth.

7. Detailed Products

Home Health Services

Encompass Health provides home health services, including skilled nursing, physical therapy, occupational therapy, and speech therapy, to patients in the comfort of their own homes.

Hospice Care

Encompass Health offers hospice care services, providing medical, emotional, and spiritual support to patients with terminal illnesses and their families.

Inpatient Rehabilitation Hospitals

Encompass Health operates inpatient rehabilitation hospitals, providing intensive rehabilitation therapy to patients who have experienced a serious illness or injury.

Home Health and Hospice Software

Encompass Health offers software solutions for home health and hospice providers, streamlining clinical, operational, and financial processes.

Outpatient Rehabilitation Centers

Encompass Health operates outpatient rehabilitation centers, providing physical, occupational, and speech therapy services to patients.

8. Encompass Health Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Encompass Health Corporation operates in the healthcare industry, which has a moderate threat of substitutes. While there are alternative healthcare providers, Encompass Health's specialized services and strong reputation reduce the threat of substitutes.

Bargaining Power Of Customers

Encompass Health Corporation's customers, primarily patients and healthcare providers, have limited bargaining power due to the specialized nature of Encompass Health's services and the lack of alternative providers.

Bargaining Power Of Suppliers

Encompass Health Corporation's suppliers, including medical equipment and pharmaceutical companies, have moderate bargaining power due to the availability of alternative suppliers and the company's dependence on these suppliers.

Threat Of New Entrants

The threat of new entrants in the healthcare industry is low due to the high barriers to entry, including regulatory requirements, capital expenditures, and the need for specialized expertise.

Intensity Of Rivalry

The healthcare industry is highly competitive, with many established players competing for market share. Encompass Health Corporation faces intense rivalry from other healthcare providers, which can lead to pricing pressures and reduced market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 59.48%
Debt Cost 6.84%
Equity Weight 40.52%
Equity Cost 8.05%
WACC 7.33%
Leverage 146.78%

11. Quality Control: Encompass Health Corporation passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Encompass Health

A-Score: 6.1/10

Value: 6.0

Growth: 5.1

Quality: 7.0

Yield: 2.0

Momentum: 8.0

Volatility: 8.7

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Tenet Healthcare

A-Score: 5.5/10

Value: 6.7

Growth: 6.8

Quality: 5.5

Yield: 0.0

Momentum: 8.5

Volatility: 5.3

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Ensign Group

A-Score: 5.5/10

Value: 2.6

Growth: 7.4

Quality: 4.7

Yield: 0.0

Momentum: 9.0

Volatility: 9.0

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DaVita

A-Score: 4.8/10

Value: 8.0

Growth: 7.0

Quality: 4.7

Yield: 0.0

Momentum: 2.0

Volatility: 7.0

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Chemed

A-Score: 4.5/10

Value: 3.5

Growth: 6.0

Quality: 7.3

Yield: 0.0

Momentum: 2.0

Volatility: 8.3

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Select Medical

A-Score: 4.4/10

Value: 7.7

Growth: 4.3

Quality: 4.0

Yield: 4.0

Momentum: 1.0

Volatility: 5.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

108.01$

Current Price

108.01$

Potential

-0.00%

Expected Cash-Flows