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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's recent performance has been negatively impacted by allegations of issuing materially misleading business information to the investing public. The Rosen Law Firm has launched an investigation into potential securities claims on behalf of shareholders. The company's Q3 2025 earnings call and subsequent analysis of key metrics have also drawn attention. Furthermore, Asset Management One Co. Ltd. has increased its holdings in the company. The ongoing investigation and scrutiny over the company's business information have likely contributed to the negative drivers behind its recent performance.

1.c. Company Highlights

2. Encompass Health's Q3 Earnings Beat Expectations

Encompass Health reported a 9.4% increase in revenue and an 11.4% growth in adjusted EBITDA in Q3, driven by a 5% increase in total discharges and a 3.3% increase in net revenue per discharge. Adjusted EBITDA increased to $300.1 million, and earnings per share (EPS) came in at $1.23, beating analyst estimates of $1.19. The company's financial performance has been robust, with year-to-date revenue growth of 10.6% and adjusted EBITDA growth of 14.5%. The company's guidance for 2025 has been increased, with net operating revenue expected to be between $5.905 billion and $5.955 billion, and adjusted EBITDA expected to be between $1.235 billion and $1.255 billion.

Publication Date: Nov -02

📋 Highlights
  • Revenue & EBITDA Growth:: Q3 revenue rose 9.4% YoY, adjusted EBITDA surged 11.4% to $300.1M, with YTD growth at 10.6% and 14.5% respectively.
  • 2025 Guidance Raised:: Net operating revenue now projected at $5.905B–$5.955B; adjusted EBITDA at $1.235B–$1.255B, reflecting strong expansion confidence.
  • Capacity Expansion Momentum:: 3 new hospitals opened in Q3 (39 beds added), with 2 more (100 beds) planned for Q4; 14-hospital pipeline (690 beds) targets 2025–2027.
  • Turnover Stability:: Q3 RN turnover at 20.2% (vs. 20.3% prior year), therapist turnover at 7.8%, aligning with pre-pandemic norms.
  • Free Cash Flow Outlook:: Adjusted free cash flow fell 8.2% to $174.2M (Q3) but full-year guidance raised to $730M–$810M, citing working capital normalization.

Operational Highlights

The company's clinical teams continue to deliver outstanding patient outcomes, with a Q3 discharge community rate of 84.6%. The company has invested in its clinical staff by providing professional growth and development opportunities, contributing to favorable turnover rates. The company opened 3 new hospitals in Q3 and added 39 beds to existing hospitals, with plans to open 2 additional hospitals in Q4.

Growth Prospects

Encompass Health is well-positioned for growth, with a pipeline of 14 announced new hospitals and 690 beds. The company expects to add approximately 127 beds to existing hospitals in 2025, and 150 to 200 in both 2026 and 2027. According to Douglas Coltharp, "The fact that we're increasing bed expansions and doing it for a multiyear period is a validation of our business model and strategy." Analysts estimate revenue growth of 8.8% for next year.

Valuation

Encompass Health's current valuation metrics indicate a price-to-earnings (P/E) ratio of 21.15, price-to-book (P/B) ratio of 3.65, and enterprise value-to-EBITDA (EV/EBITDA) ratio of 9.03. These metrics suggest that the company's stock is fairly valued, with a reasonable multiple for its earnings and book value. The company's return on equity (ROE) is 22.45%, indicating a strong ability to generate profits from shareholder equity.

3. NewsRoom

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Prysmian's Draka EHC Named Best Supplier for Ropes and Traveling Cables in Elevator World's Ellie Awards

Dec -05

Source:

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EHC Opens New Lake Worth Rehab Hospital to Meet Rising Demand

Dec -03

Source: zacks.com

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Encompass Health Rehabilitation Hospital of Lake Worth now open in Florida

Dec -02

Source: prnewswire.com

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Advantage Alpha Capital Partners LP Sells 31,005 Shares of Encompass Health Corporation $EHC

Nov -28

Source: defenseworld.net

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EHC Expands in Tennessee Via New JV Facility With Vanderbilt Health

Nov -26

Source: zacks.com

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Encompass Health and Vanderbilt Health announce plans to build a 40-bed inpatient rehabilitation hospital in Lebanon, Tennessee

Nov -25

Source: prnewswire.com

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Encompass Health Corporation $EHC Position Boosted by Bahl & Gaynor Inc.

Nov -22

Source: defenseworld.net

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Encompass Health announces plans to build a 50-bed inpatient rehabilitation hospital in Fishers, Indiana

Nov -21

Source: prnewswire.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: 5.7/10

Value: 3.8

Growth: 5.1

Quality: 7.0

Yield: 1.0

Momentum: 8.5

Volatility: 8.7

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Tenet Healthcare

A-Score: 5.2/10

Value: 6.3

Growth: 6.8

Quality: 5.5

Yield: 0.0

Momentum: 7.5

Volatility: 5.3

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Ensign Group

A-Score: 5.0/10

Value: 2.0

Growth: 7.6

Quality: 4.4

Yield: 0.0

Momentum: 7.0

Volatility: 9.0

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DaVita

A-Score: 4.8/10

Value: 8.2

Growth: 7.0

Quality: 4.8

Yield: 0.0

Momentum: 2.0

Volatility: 7.0

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Chemed

A-Score: 4.2/10

Value: 2.9

Growth: 6.1

Quality: 7.3

Yield: 0.0

Momentum: 1.0

Volatility: 7.7

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Select Medical

A-Score: 3.8/10

Value: 6.8

Growth: 4.3

Quality: 2.5

Yield: 3.0

Momentum: 1.0

Volatility: 5.3

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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

108.04$

Current Price

108.04$

Potential

-0.00%

Expected Cash-Flows