Since April 2021, the S&P 500 has delivered a total return of 61.3%. But one standout stock has nearly doubled the market - over the past five years, The Ensign Group has surged 112% to $202.50 per share. Its momentum hasn’t stopped as it’s also gained 14.8% in the last six months, beating the S&P by 16.9%.
Is now still a good time to buy ENSG? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Does ENSG Stock Spark Debate?
Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ: ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.
Two Positive Attributes:
1. Projected Revenue Growth Is Remarkable
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite, though some deceleration is natural as businesses become larger.
Over the next 12 months, sell-side analysts expect The Ensign Group’s revenue to rise by 18.3%, close to its 17% annualized growth for the past five years. This projection is admirable and suggests the market is forecasting success for its products and services.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
The Ensign Group’s EPS grew at a spectacular 13.8% compounded annual growth rate over the last five years. This performance was better than most healthcare businesses.
One Reason to be Careful:
New Investments Fail to Bear Fruit as ROIC Declines
We like to invest in businesses with high returns, but the trend in a company’s ROIC can also be an early indicator of future business quality.
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, The Ensign Group’s ROIC has unfortunately decreased significantly. Only time will tell if its new bets can bear fruit and potentially reverse the trend.
Final Judgment
The Ensign Group has huge potential even though it has some open questions, and with its shares beating the market recently, the stock trades at 26.3× forward P/E (or $202.50 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.
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