Ensign Group (ENSG): Revisiting Valuation After Strong Q3 Revenue Beat and Upgraded EPS Guidance

Ensign Group (ENSG) just turned in a Q3 that caught Wall Street’s eye, with revenue up about 20% year over year and both sales and full year EPS guidance topping expectations.

See our latest analysis for Ensign Group.

The solid Q3 update is landing against a backdrop of strong momentum, with a roughly 32 percent year to date share price return and a standout 142 percent five year total shareholder return suggesting investors are steadily rewarding Ensign’s growth profile.

If this kind of steady compounding appeals to you, it might be worth exploring other healthcare names using our screener for healthcare stocks that could offer similar long term potential.

Yet with shares near record highs, trading at only a modest discount to analyst targets and intrinsic value estimates, investors now face a key question: Is Ensign still mispriced, or has the market already baked in the next leg of growth?

Price-to-Earnings of 30.7x: Is it justified?

On a headline basis, Ensign Group’s valuation looks rich, with its shares trading at a price-to-earnings ratio of 30.7 times based on the latest close of $175.36. This implies investors are paying a premium earnings multiple relative to peers.

The price-to-earnings ratio compares the current share price to the company’s earnings per share. It is a common yardstick for gauging how much the market is willing to pay for each dollar of current profits and is particularly relevant for a consistently profitable operator like Ensign in a mature but steadily growing healthcare services sector.

That premium is not small. Ensign’s 30.7 times multiple stands well above both the peer group average of 18.7 times and the broader US Healthcare industry average of 23.9 times. It also exceeds the 25.9 times level our fair price-to-earnings framework suggests the market could reasonably migrate toward as expectations normalise.

Explore the SWS fair ratio for Ensign Group

Result: Price-to-Earnings of 30.7x (OVERVALUED)

However, rising regulatory scrutiny and any slowdown in post acute demand or reimbursement rates could quickly challenge today’s premium multiple and upbeat growth expectations.

Find out about the key risks to this Ensign Group narrative.

Another View on Value

Our DCF model paints a different picture, suggesting Ensign is about 15 percent undervalued at $175.36 versus an estimated fair value near $207.18. If earnings and cash flows keep compounding, could today’s premium multiple still leave room for upside?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Ensign Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 914 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Ensign Group Narrative

If you see the numbers differently or want to dig into the drivers yourself, you can build a personalised view in just a few minutes, starting with Do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Ensign Group.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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