Encompass Health (EHC): Assessing Valuation After Strong Q3 Results and Upgraded 2025 Outlook

Encompass Health (EHC) just issued an earnings update that stands out, not only for a solid third quarter but also for revising its 2025 earnings guidance upward. Management’s move suggests a brighter business outlook ahead.

See our latest analysis for Encompass Health.

After posting upbeat results and raising 2025 guidance, Encompass Health’s share price has cooled a little recently, down 8.1% over the past month. However, it has still built real momentum for the year with a year-to-date share price return of 25.3%. Looking at the longer term, a 3-year total shareholder return of 106% highlights the significant value that has accrued for investors. The buyback activity in recent months is another strong indication that management sees more potential ahead.

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With strong earnings, a robust track record, and management’s confidence on display, the real question is whether Encompass Health’s recent momentum signals an undervalued opportunity for investors or if the market is already pricing in its future growth.

Most Popular Narrative: 17.3% Undervalued

With Encompass Health closing at $115.07, the most widely referenced narrative puts fair value noticeably higher, suggesting material upside from today’s price. This perspective captures bullish momentum while signaling that the consensus leans toward optimism based on strong underlying trends.

The surge in the 65-plus population and persistent undersupply of inpatient rehabilitation beds are driving high and still-unmet demand for Encompass Health's core services. Ongoing hospital openings and bed expansions position the company to capture significant incremental patient volume, supporting higher revenue growth for years to come.

Read the complete narrative.

Want to uncover the formula powering this valuation call? A confident combination of growth levers, profit drivers, and one pivotal future assumption set this narrative apart. The results hinge on projections the market hasn't fully digested, and only the full story reveals what’s behind the strong price estimate.

Result: Fair Value of $139.08 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent labor shortages and potential regulatory changes could disrupt Encompass Health’s growth story. These factors pose real risks to the optimistic outlook.

Find out about the key risks to this Encompass Health narrative.

Build Your Own Encompass Health Narrative

If you have a different perspective or want to dig into the numbers yourself, you can easily craft your own take in just a few minutes. Go ahead and Do it your way.

A great starting point for your Encompass Health research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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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