The Ensign Group (ENSG) has solid long-term prospects for growth, which will be driven by the aging of the American population and the company’s strategy for its internal operations.
Business
The company provides nursing and rehabilitative care services in California, Arizona, Texas, Washington, Utah, Colorado, and Idaho.
According to the Department of Health and Human Services, there are approximately 40 million elderly people covered by Medicare and/or Medicaid. The federal government estimates that the total number covered will increase to over 60 million by 2030. Those demographics should keep nursing and rehab care centers busy for the next few decades.
Meanwhile, ENSG is focused on generating growth from its current facilities. It continues to improve operations through higher occupancy rates, higher quality mix, and a higher proportion of Medicare patient days.
The company is also targeting potential acquisitions to supplement its growth as well as move into different areas of health care. For instance, ENSG recently acquired a home health care business in Idaho. That could pave the way for additional acquisitions outside its core skilled nursing facilities business.
Growth and Income
The company is expected to produce long-term earnings growth of 15.0% annually. The company’s return on equity is 18.8%, and its stock offers investors a dividend yield of 1.1%.
This Zacks #2 Rank stock trades at just 10.0x 2010 consensus EPS estimates and 9.3x 2011 consensus EPS estimates.
First-Quarter Results
On May 5, The Ensign Group announced first-quarter results. Total revenue was a record $154.2 million, up 18.3% on a consolidated basis. The company earned $0.45, an increase of 15.4% compared to the year-ago quarter. It also topped the Zacks Consensus Estimate by 2 cents, or 4.7%.
Outlook
Ensign reiterated its previous 2010 EPS guidance of $1.75-$1.79 based on revenues of $605 million-$615 million.
Estimates
After the company’s Q1 report, the Zacks Consensus Estimate for 2010 and 2011 each increased 3 cents.
The Chart
ENSG shares bottomed around $13 in Sept 2009. In the last eight months, the stock has appreciated about 34%. Since the beginning of the year, the stock has traded in a range from $16 to $19. It is currently 7% off its 52-week high of $18.98.
