Encompass Health Corporation Common Stock (EHC)

FairStock Score: 63/100 — STEADY

Key Financials

Strengths

• Generates $297 million in annual free cash flow (2.9% yield on market cap)
• Strong Piotroski F-Score of 8/9 indicating robust financial health across profitability, leverage, and efficiency metrics
• High return on equity of 24.8% demonstrating efficient capital deployment
• Established organization with 24,611 employees providing operational scale

Concerns

• Trades significantly above Graham Number ($55) with negative 84% margin of safety—limited downside protection

AI Analysis

Encompass Health Corporation Common Stock is a mid-cap healthcare company valued at $10.1 billion. The business generates $5.9 billion in annual revenue with a 2.5% net margin and $297 million in free cash flow. From a quality standpoint, Encompass shows near-perfect Piotroski F-Score of 8/9 indicating exceptional financial health and Altman Z-Score of 2.2 in the grey zone. On valuation, the stock is reasonably priced at 18.4x earnings, with trades above its Graham Number with a negative 84% margin. Growth dynamics show revenue growing at 9.9% and profit growth of 20.8%. Our composite FairStock Score of 63/100 reflects above-average fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Improving fundamentals and sector tailwinds could drive meaningful earnings growth, compressing the effective multiple for patient investors. With $297 million in annual free cash flow (2.9% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Macro headwinds or sector-specific disruption could pressure margins, particularly if competitive intensity increases in the healthcare space. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer