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Encompass Health Corporation
🏹 Trader: 🎯 Near 52W High | BRS 75 Ready View all →
$12.2B
Market Cap
19.2
P/E
1.30
PEG
14.7%
ROCE
24.8%
ROE
0.83
D/E
17.7%
OPM
-3.8%
% from 52W High
64
α RS
🔍 EHC is showing a high-conviction setup because it matches 9 of 39 tracked screener presets, RS Rating is 64, and an ECS of 56.1 last quarter. Net: Broad signal stack, not a recommendation. ? Conviction RS Rating ECS
Sources
Conviction 9/39 · RS Rating 64 · ECS 56.1
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About

Encompass Health Corporation operates inpatient rehabilitation hospitals in the United States and Puerto Rico. The company offers specialized rehabilitative treatment, using technology and therapy, on an inpatient basis for patients recovering from a major injury or illness and seeking to regain functional ability, independence, and quality of life; medical, nursing, therapy, and ancillary services; and rehabilitative care 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. It offers services through the Medicare program to the federal government, managed care plans and private insurers, state governments, and other patients. The company was formerly known as HealthSouth Corporation and changed its name to Encompass Health Corporation in January 2018. Encompass Health Corporation was incorporated in 1984 and is based in Birmingham, Alabama.

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📈 Growth Pattern
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⭐ Superinvestors Holding EHC
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Manager Shares Value % of Fund Period
Jim Simons Renaissance Technologies LLC 265.0K $25.6M 0.04% Mar 2026

SEC Form 13F data. 45-day lag from quarter end.

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3-Statement Financial Model
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📊 MIXED Q1 revenue $1.59B, adj EBITDA $348.8M, raised 2026 guidance
Revenue & Profitability
Q1 revenue was $1.59 billion (up 9% YoY), adjusted EBITDA $348.8 million (up 11.2%). Discharge growth was 4.3% (1.6% same-store). Bad debt expense was 2.2% (up 20 bps due to legacy audit write-off). SWB per FTE increased 3.7%. Premium labor costs fell to $25.9 million (down $2.7M). Net pre-opening costs were $4M. Adjusted free cash flow was $194M. Guidance raised: 2026 revenue $6.375-$6.47B, adjusted EBITDA $1.35-$1.38B, adjusted EPS $5.89-$6.11.
Outlook
Management sees strong, growing demand for IRF services due to aging U.S. population (20% age 65+ by 2030). The Medicare Advantage penetration appears to have peaked at ~52% and is receding in some markets, benefiting fee-for-service volumes. Regulatory challenges include TeamWorks implementation (Jan 1), RCD expansion into Texas and California, and the 2027 IRF proposed rule (2.4% net market basket update). CMS's RFI on payment classification is considered benign and not a site-neutral concept. Occupancy constraints (35% of hospitals >90% occupancy) are a 'high-quality problem' that management is addressing.
Growth Drivers
Key growth drivers include new hospital openings (7 more in 2026, 340 beds) and bed expansions (100-150 beds to existing hospitals). The company has 11 announced hospitals beyond 2026 (520 beds). Small format hospitals, one expected in 2027, complement hub-and-spoke strategy. Occupancy threshold for expansions lowered to 70-75% to better time capacity additions. Joint ventures (e.g., Piedmont) and consolidation of closed units (adding 66 beds in those markets) further support growth. Medicare Advantage admit-and-appeal pilot (9 hospitals) shows early approval improvement.
Balance Sheet & CapEx
Net pre-opening costs for Q1 were $4M, full-year expected $18-22M. Growth CapEx midpoint is $725M. Management expects CapEx as % of revenue to peak around 15% over 2-3 years, then recede to 10-12% longer term. Q1 share repurchases were $71.6M. Net leverage at quarter-end was 1.9x. The company is investing in AI with Palantir for market analysis, CRM, revenue cycle management, and clinical staffing. Small format hospitals are under evaluation for dozens of markets.
Margins
SWB as a % of revenue is at the lowest level ever, driven by lower clinical turnover (RN 17.8%, therapist 6.4%), reduced premium labor (down 9.4%), and unit closures (breakeven units removed). State-directed payment revenue boosted Q1 EBITDA by $4.2M out-of-period; full-year net provider tax impact expected flat at ~$21M. Operating leverage from improved efficiency: same-store labor trends improving. Guidance implies EBITDA margin of roughly 21% (midpoint). Timing of de novos and occupancy seasonality affect quarterly margins.
Key Risks
Risks flagged: regulatory changes (TeamWorks, RCD, IRF proposed rule), Medicare Advantage utilization management from a large national payer, occupancy constraints (35% of hospitals >90% occupancy), unit closures (3 IRF units and 1 SNF unit closed, with one more to close in early 2027), and a light flu/respiratory season affecting volume. Bad debt increased due to a legacy audit claim write-off. MA penetration decline could affect volume mix.
Generated by AI · Q1 2026 results · Not investment advice
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✓ 📞 Earnings Call Transcripts (5 quarters) submit a missing quarter
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📞 Earnings Call Transcripts (5)
Q2 2026 Q2 2026 2026-08-06
Q2 2026 saw 9.6% revenue growth and 9.2% adjusted EBITDA growth, prompting a guidance raise for the year. High-acuity patient volumes and strong capacity expansion drove results, while workforce initiatives reduced turnover and premium labor costs.
Q1 2026 Q1 2026 2026-05-01
Q1 2026 saw 9% revenue and 11.2% adjusted EBITDA growth, prompting raised full-year guidance. Occupancy and demand remain high, with ongoing capacity expansions and strong patient outcomes. MA payer dynamics and regulatory changes present challenges, but free cash flow and capital allocation remain robust.
Q4 2025 Q4 2025 2026-02-06
Revenue and EBITDA grew double digits in 2025, driven by strong discharge growth, pricing, and disciplined expense management. 2026 guidance projects continued growth, with robust cash flow supporting investments and shareholder returns.
Q3 2025 Q3 2025 2025-10-30
Q3 2025 saw 9.4% revenue and 11.4% adjusted EBITDA growth, with strong patient outcomes and labor management. Guidance was raised, capacity expansion plans accelerated, and free cash flow and share repurchases increased. Net leverage remains low and market demand is robust.
Q2 2025 Q2 2025 2025-08-05
Q2 saw 12% revenue and 17.2% adjusted EBITDA growth, driven by strong discharge and specialty volume increases. Guidance and CapEx were raised, with robust cash flow, low leverage, and continued expansion plans supported by favorable market trends.
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Financial Model
Projections are built from each company's audited annual financials (Income Statement, Balance Sheet, Cash Flow) over the last 5 fiscal years. Forward assumptions — revenue growth %, EBITDA margin, D&A (USD millions), interest expense, tax rate, and capex — are AI-generated using historical context and refreshed twice a year: after the December results season and after the September/Q4 results season.

DCF Valuation
Fair Value = Σ(FCFt / (1+WACC)t) + Terminal Value. Terminal Value uses the Gordon Growth Model: FCF5 × (1+g) / (WACC−g). Default WACC: 10% (US risk-free ~4.5%, equity risk premium ~5.5%). Default terminal growth: 3% (long-run US nominal GDP proxy).

CAGR Tracker
Expected 5-year CAGR = (DCF Fair Value / Current Price)1/5 − 1. Assumes fair value is reached in exactly 5 years — a mechanical estimate only.

Data Sources & Limitations
Financial statements sourced from public filings. Prices updated daily. Forward assumptions are AI-generated. All monetary values in USD millions. Non-US ADR companies may have currency conversion inaccuracies. Models are point-in-time and do not update intra-quarter or account for M&A, macro shocks, or extraordinary items.

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Investment Risk:
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No Investment Recommendation:
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Information Sources:
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