Last week, you might have seen that Encompass Health Corporation (NYSE:EHC) released its quarterly result to the market. The early response was not positive, with shares down 6.0% to US$63.32 in the past week. Encompass Health reported US$1.2b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$0.78 beat expectations, being 9.2% higher than what the analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Encompass Health after the latest results.
After the latest results, the 13 analysts covering Encompass Health are now predicting revenues of US$5.14b in 2021. If met, this would reflect a solid 11% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to shoot up 41% to US$3.78. In the lead-up to this report, the analysts had been modelling revenues of US$5.18b and earnings per share (EPS) of US$3.83 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$84.43. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Encompass Health analyst has a price target of US$100.00 per share, while the most pessimistic values it at US$70.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Encompass Health shareholders.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. The analysts are definitely expecting Encompass Health's growth to accelerate, with the forecast 11% growth ranking favourably alongside historical growth of 8.5% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 6.8% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Encompass Health to grow faster than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Encompass Health. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Encompass Health analysts - going out to 2022, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Encompass Health (at least 1 which is potentially serious) , and understanding these should be part of your investment process.
This article by Simply Wall St is general in nature. 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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