The Ensign Group has been treading water for the past six months, recording a small return of 4.1% while holding steady at $154.94.
Does this present a buying opportunity for ENSG? Or is its underperformance reflective of its story and business quality? Find out in our full research report, it’s free.
Why Does The Ensign Group Spark Debate?
Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ:ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.
Two Things to Like:
1. Elevated Demand Drives Higher Sales Volumes
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Specialized Medical & Nursing Services company because there’s a ceiling to what customers will pay.
The Ensign Group’s units sold punched in at 2.62 million in the latest quarter, and over the last two years, averaged 12.2% year-on-year growth. This performance was impressive and shows its offerings have a unique value proposition (and perhaps some degree of customer loyalty). 
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
The Ensign Group’s astounding 17.3% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
One Reason to be Careful:
New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, The Ensign Group’s ROIC has decreased significantly over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.
Final Judgment
The Ensign Group’s merits more than compensate for its flaws, but at $154.94 per share (or 23.4× forward P/E), is now the right time to buy the stock? See for yourself in our comprehensive research report, it’s free.
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