Encompass Health Flexes Its Muscle: Margins Widen as Volumes Climb

Encompass Health Corporation EHC is proving that smart expansion and operational discipline can deliver meaningful results. Fueled by an aging population and growing demand for inpatient rehabilitation, volumes keep rising while the company has steadily widened its margins.

To meet the influx of patients, Encompass Health has been actively expanding its hospital footprint and adding new beds. Despite a shorter average length of stay, occupancy rates are trending upward, from 72.1% in 2023 to 74.6% in 2024 and 77.7% average through the first half of 2025. Patient discharges also highlight the growth story, climbing 8.7% in 2023, 8.3% in 2024 and 6.8% in the first six months of 2025.

Meanwhile, the company has leveraged its pricing power, with revenues per visit soaring 27%, 40.8% and 68% across the same periods. Net operating revenues witnessed lower end of double-digit growth over the previous couple of years, as well as the first two quarters of 2025.

Operational efficiency is another key driver. Investments in technology, smarter staffing strategies and tighter cost controls have helped the company contain labor expenses and enhance profitability. Adjusted net margin rose from 7.7% in 2023 to 8.4% in 2024, reaching 9.7% on average in the first half of 2025.

With patient demand accelerating and efficiency gains compounding, Encompass Health looks well-positioned to sustain its growth momentum and keep flexing its financial muscle. The Zacks Consensus Estimate for its 2025 earnings implies an 18.3% rise year over year.

How Are Other Medical Stocks Faring?

Peers like Universal Health Services, Inc. UHS and Tenet Healthcare Corporation THC in the Medical space are also witnessing rising revenues.

Universal Health’s revenues increased 6.6% in 2023 and 10.8% in 2024. The Zacks Consensus Estimate for 2025 indicates an 8.5% year-over-year jump to $17.2 billion. UHS is expected to sustain the momentum with growth in admissions at its acute care facilities and behavioral health care services. Meanwhile, Tenet Healthcare’s 2023 and 2024 revenues rose 7.2% and 0.6%. The consensus estimate indicates a 2.4% increase in the top line in 2025 for THC, supported by a favorable payer mix.

Encompass Health’s Price Performance and Valuation

Shares of Encompass Health have jumped 36.4% year to date compared with the industry’s growth of 10.1%.

From a valuation standpoint, Encompass Health trades at a forward price-to-earnings ratio of 22.55X, higher than the industry average of 19.59X. EHC carries a Value Score of B.

The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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