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what it is
Encompass runs rehab hospitals where patients recover after strokes, surgeries, and serious injuries.
how it gets paid
Last year Encompass Health made $5.9B in revenue. Medicare was the main engine at $3.84B, or 65% of sales.
why it's growing
Revenue grew 10.5% last year. 2025 EPS reached $5.45 versus $4.46 in 2024.
what just happened
Fourth-quarter EPS came in at $1.46, above the $1.35 consensus and above the $1.38 internal estimate.
At a glance
B+ balance sheet — decent shape, but not bulletproof
75/100 earnings predictability — reasonably predictable
20.2x trailing p/e — priced about right
0.7% dividend yield — cash in your pocket every quarter
13.0% return on capital — nothing to write home about
xvary composite: 58/100 — below average
What they do
Encompass runs rehab hospitals where patients recover after strokes, surgeries, and serious injuries.
If your family needs inpatient rehab, distance and bed access matter more than a catchy brand. Encompass has 173 hospitals, 11,094 licensed beds, and operations in 39 states plus Puerto Rico. Scale → more beds and referral relationships → more patients in the door, so local competitors have to fight a national network with real capacity.
How they make money
$5.9B
annual revenue · their business grew +10.5% last year
Medicare
$3.84B
Medicare Advantage
$0.99B
Managed Care
$0.64B
Medicaid
$0.19B
Other
$0.24B
The products that matter
operates rehabilitation hospitals
Inpatient Rehabilitation Hospitals
$5.9B revenue base · 24% operating margin
this is the center of gravity. the snapshot ties the business to $5.9B in revenue and a 24% operating margin, which is why reimbursement discipline matters so much.
core engine
provides home-based care
Home Health & Hospice
care moves outside hospitals
the snapshot does not break out standalone revenue here. what you do know is the consolidated business did $5.9B last year, and management is positioned around lower-cost care settings that can extend the recovery pathway.
adjacent growth
Key numbers
65.1%
medicare mix
Most of your revenue comes from one payor. Translation: policy matters almost as much as patient demand.
24.0%
operating margin
Margin → profit left after running the business → so what: this is high for hospitals and gives Encompass room to absorb pressure.
$2.4B
long-term debt
Debt is 18% of capital, which is manageable next to a B+ balance sheet grade and a $11B market cap.
13.0%
return on capital
Return on capital → profit earned on money invested → so what: Encompass is getting decent returns from a bed-heavy business.
Financial health
B+
strength
- balance sheet grade B+ — solid but not elite
- risk rank 3 — safer than 50% of stocks
- price stability 75 / 100
- long-term debt $2.4B (18% of capital)
- net profit margin 10.3% — keeps 10 cents of every dollar in revenue
- return on equity 22% — $0.22 profit for every $1 investors have put in
B+ — functional but not a standout on the balance sheet.
Total return vs. market
You invested $10,000 in EHC 3 years ago → it's now worth $18,290.
The index would have given you $13,880.
source: institutional data · total return
What just happened
beat estimates
Fourth-quarter EPS came in at $1.46, above the $1.35 consensus and above the $1.38 internal estimate.
2025 EPS reached $5.45 versus $4.46 in 2024. Revenue rose 10.5% to $5.9B, and the fourth quarter showed earnings growth reaccelerating.
$5.9B
revenue
$1.46
eps
24.0%
gross margin
the number that mattered
The key number was $1.46 in Q4 EPS, because it showed the second-half slowdown did not turn into a stall.
-
encompass health’s earnings growth reaccelerated in the fourth quarter.
-
after generating 23% bottom-line growth over the first six months of last year, the third-quarter 16% gain prompted some profit taking.
-
however, final-quarter earnings of $1.46 per share exceeded our $1.38 estimate, and were 24% above the prior-year period.
-
the outlook for 2026 has improved.
-
revenue is targeted to come in between $6.365 billion and $6.465 billion.
source: company earnings report, 2026
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What could go wrong
the #1 risk is CMS reimbursement pressure in inpatient rehabilitation.
med
CMS rate changes hit the core business directly
annual reimbursement updates run straight through the model. when the company did $5.9B in revenue last year, even modest pricing pressure matters.
this risk touches essentially the entire $5.9B revenue base and can squeeze both volume economics and the 24% operating margin.
med
labor inflation can make a good margin look less special
rehab care is a people business. the company posts a 24% operating margin, but only a 9.8% net margin after everything else comes out.
that gap matters. staffing costs rising faster than reimbursement would show up quickly in earnings, even if revenue keeps growing.
med
growth normalization would change the valuation conversation
the stock has earned a respectable multiple because revenue grew 10.5% and the three-year return beat the market. at 20.2x trailing earnings, you still need that growth story to keep showing up.
if 2026 revenue drifts toward or below the $6.365B low end of guidance, the stock stops looking like a steady compounder and starts looking fully valued.
a reimbursement reset would pressure the economics of a business that currently runs at 24% operating margin on $5.9B of revenue.
source: institutional data · regulatory filings · risk analysis
Pay attention to
guidance
the next print against $6.365B–$6.465B revenue guidance
that range is the clearest test of whether last year's 10.5% growth was a step up or just a good stretch.
metric
operating margin versus the current 24%
this is the number that makes EHC stand out. if it slips, the whole quality narrative gets less convincing.
risk
CMS reimbursement updates
annual rate decisions are not background noise here. they affect the economics of the core rehab model.
trend
whether institutional buying gets more decisive
three straight quarters of net buying sounds good. 282 buyers versus 281 sellers says it has been positive, not overwhelming.
Analyst rankings
short-term outlook
average
momentum score 3 — in human-speak, analysts think the stock is behaving pretty normally right now.
risk profile
average
stability score 3 — typical risk profile. not a bunker stock, not a rollercoaster.
chart momentum
top 20%
technical score 2 — analysts see above-average price action in the year ahead, even if the business itself remains steady rather than flashy.
earnings predictability
75 / 100
management has been reasonably reliable. you usually are not buying into wild estimate misses here.
source: institutional data
Institutional activity
institutions have been net buying for 3 consecutive quarters — 282 buyers vs. 281 sellers in 3q2025. total institutional holdings: 94.5M shares. net buying for 3 quarters.
source: institutional data
Price targets
3-5 year target range
$88
$167
$110
current price
$128
target midpoint · +16% from current · 3-5yr high: $225 (+105% · 20% ann'l return)
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