Should You Investigate Encompass Health Corporation (NYSE:EHC) At US$48.81?

While Encompass Health Corporation (NYSE:EHC) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NYSE, rising to highs of US$53.86 and falling to the lows of US$45.23. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Encompass Health's current trading price of US$48.81 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Encompass Health’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Our analysis indicates that EHC is potentially undervalued!

What's The Opportunity In Encompass Health?

According to my valuation model, the stock is currently overvalued by about 25%, trading at US$48.81 compared to my intrinsic value of $39.16. Not the best news for investors looking to buy! In addition to this, it seems like Encompass Health’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Encompass Health generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 2.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Encompass Health, at least in the short term.

What This Means For You

Are you a shareholder? EHC’s future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe EHC should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on EHC for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Encompass Health as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Encompass Health and we think they deserve your attention.

If you are no longer interested in Encompass Health, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.