Ensign Group, Inc. (NASDAQ:ENSG) is positioned for substantial growth, riding on the surge in demand for skilled post-acute services and an upswing in occupancy rates. The company’s astute and disciplined approach to inorganic expansion is also contributing to its positive performance.
Exemplary Performance & Favorable Ranking
In the last three months, Ensign’s stock has demonstrated a notable 4.9% increase, a remarkable achievement compared to the industry’s decline of 7.7%. Operating out of San Juan Capistrano, CA, ENSG is a multifaceted provider encompassing skilled nursing, senior living, rehabilitative, and related services. The company boasts a market capitalization of $5.5 billion and maintains a thriving real estate business.
Given its promising prospects, this stock carries a Zacks Rank #2 (Buy) designation, making it a valuable addition to investment portfolios at this juncture. Let’s delve into the details.
Positive Outlook & Earnings Potential
The Zacks Consensus Estimate for Ensign’s earnings in the current year stands at $4.71 per share. Notably, this figure has undergone an upward revision in the past 30 days, with no downward revisions. The estimate indicates a substantial 13.8% year-over-year growth. Ensign’s earnings track record is notable, surpassing expectations in two of the last four quarters, meeting them once, and experiencing a minor average surprise of 0.9%.
In terms of revenue, the consensus estimate for the current year is $3.7 billion. The company is set to benefit from escalating service and rental revenues, which are poised to bolster its top-line growth. Our projections for service revenues in 2023 indicate a remarkable year-over-year growth of over 22%.
A Solid Revenue Outlook
Our estimates indicate that the company is on track for a nearly 21% growth in Medicaid and Medicare revenues in 2023. This progress can be attributed to a robust mix of skilled services and an increase in occupancy rates. It is projected that occupancy levels will rise from 75.3% in 2022 to an impressive 78.6% in 2023.
Steady Expansion & Market Share
Ensign’s acquisition pipeline has remained consistent throughout the summer, with management foreseeing even more opportunities in the upcoming fall season. The company’s healthcare operations portfolio expanded to 293, following strategic acquisitions this month, with 26 of them incorporating senior living operations. This growing presence in a diversified market positions Ensign to capture an enhanced market share.
Solid Financial Footing & Strategic Growth
The company presently possesses 112 real estate assets. Its robust balance sheet stands as a pillar of support for ongoing acquisition efforts. With a long-term debt-to-capital ratio of 9.6%, Ensign is favorably positioned compared to the industry’s average of 74.6%.
Navigating Challenges & Growth Strategy
Yet, investors should remain watchful of one particular factor. Ensign has been grappling with a persistent increase in total expenses, which is impacting its margins. Our projections for 2023 indicate a year-over-year expense increase of 23.8%. Nonetheless, a well-structured and strategic action plan is anticipated to drive sustained growth in the long run.
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