The Ensign Group, Inc ENSG is well poised for growth on the back of solid revenue growth and accretive acquisitions, which complement its organic growth and a strong capital position.
Over the past 30 days, the company’s earnings estimates for 2019 and 2020 have been revised upward by 4.8% and 5.5%, respectively. This reflects analysts' optimism on the stock.
The company has an encouraging earnings surprise history, having outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 2.61%. This trend of consecutive estimate beats underlines its operating efficiency.
The company is well poised for growth, evident from its VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
The company’s return on equity — a profitability measure — is 17.1%, better than the industry average of 9.2%. Further, the metric reflects its effectiveness in utilizing shareholders’ money.
Ensign Group reported fourth-quarter 2018 earnings of 52 cents per share, beating the Zacks Consensus Estimate by 10.6%. Earnings also improved 53% year over year, mainly on the back of strong segmental performances. Net income for the reported quarter was $26 million, up 135.3% year over year.
Total revenues of the company increased 10.2% year over year to $538 million. It is to be noted that Ensign Group’s top line has been growing since 2012, which is also evident from its 2012-2018 CAGR of 16.3%. Results can be attributable to the Transitional & Skilled Services segment along with growth strategies.
Moreover, the company boasts solid inorganic growth story, with several acquisitions in the past decade. With each buyout, it sharpened its expertise, strengthened its capabilities and consolidated its financial flexibility. Ensign Group continues to actively seek opportunities for acquiring real estate and leasing well-performing and struggling skilled nursing, assisted living, and other healthcare related businesses in new and current markets.
Ensign Group has been taking several initiatives to deploy capital efficiently. Frequent share repurchases and dividend payments at regular intervals helped the company to retain investors’ confidence in this stock. The company has been paying dividends since 2002 and increased payouts annually for the past 16 years. We believe its financial strength to continue buoying investors’ confidence in the stock.
The Zacks Consensus Estimate for current-year earnings is pegged at $2.18, representing a year-over-year improvement of 15.9% on 12.4% higher revenues of $2.3 billion.
For 2020, the Zacks Consensus Estimate for earnings stands at $2.48 on $2.51 billion revenues, translating into respective 13.8% and 8.7% year-over-year growth.
Expected long-term earnings growth rate is 13.8%, above the industry’s average of 4.1%, which is an upside for the company.
Shares of this Zacks Rank #1 (Strong Buy) company have rallied 33% year to date, outperforming S&P 500’s gain of 11.7% in the same time frame.
Other Key Picks
Investors interested in the medical sector can take a look at some other top-ranked stocks like UnitedHealth Group Incorporated UNH, Centene Corporation CNC and WellCare Health Plans, Inc. WCG, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UnitedHealth operates as a diversified health care company in the United States. In the last four quarters, the company delivered average beat of 3.39%.
Centene operates as a diversified and multi-national healthcare enterprise in the United States. It recorded average earnings surprise of 5.05% in the last four quarters.
WellCare Health offers managed care services for government-sponsored health care programs. The company pulled off average positive surprise of 15.43% in the trailing four quarters.
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