Head to Head Analysis: Encompass Health (EHC) vs. Select Medical (SEM)

Encompass Health (NYSE: EHC) and Select Medical (NYSE:SEM) are both mid-cap medical companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, institutional ownership, earnings, risk, dividends, valuation and analyst recommendations.

Dividends

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Encompass Health pays an annual dividend of $1.00 per share and has a dividend yield of 1.7%. Select Medical does not pay a dividend. Encompass Health pays out 36.2% of its earnings in the form of a dividend.

Earnings and Valuation

This table compares Encompass Health and Select Medical’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Encompass Health $3.97 billion 1.43 $256.30 million $2.76 20.94
Select Medical $4.44 billion 0.55 $177.18 million $0.97 18.66

Encompass Health has higher earnings, but lower revenue than Select Medical. Select Medical is trading at a lower price-to-earnings ratio than Encompass Health, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Encompass Health and Select Medical’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Encompass Health 6.45% 20.59% 5.43%
Select Medical 3.99% 14.27% 2.52%

Insider and Institutional Ownership

91.7% of Encompass Health shares are owned by institutional investors. Comparatively, 76.4% of Select Medical shares are owned by institutional investors. 1.6% of Encompass Health shares are owned by company insiders. Comparatively, 19.9% of Select Medical shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Volatility and Risk

Encompass Health has a beta of 0.38, indicating that its stock price is 62% less volatile than the S&P 500. Comparatively, Select Medical has a beta of 1.29, indicating that its stock price is 29% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent recommendations for Encompass Health and Select Medical, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Encompass Health 0 2 3 0 2.60
Select Medical 0 2 5 0 2.71

Encompass Health currently has a consensus price target of $62.33, indicating a potential upside of 7.86%. Select Medical has a consensus price target of $20.57, indicating a potential upside of 13.65%. Given Select Medical’s stronger consensus rating and higher probable upside, analysts plainly believe Select Medical is more favorable than Encompass Health.

Summary

Encompass Health beats Select Medical on 9 of the 16 factors compared between the two stocks.

About Encompass Health

Encompass Health Corporation, formerly HealthSouth Corporation, is a provider of post-acute healthcare services, offering both facility-based and home-based post-acute services in 35 states and Puerto Rico through its network of inpatient rehabilitation hospitals, home health agencies and hospice agencies. The Company manages its operations through segments, including inpatient rehabilitation, and home health and hospice. It is an owner and operator of inpatient rehabilitation hospitals. It provides specialized rehabilitative treatment on both an inpatient and outpatient basis. It offers its home health and hospice services through Encompass Home Health and Hospice business (Encompass). Encompass operates home health and hospice agencies in 25 states, with concentrations in the Southeast, Oklahoma, and Texas. As of December 31, 2016, the Company operated 123 inpatient rehabilitation hospitals.

About Select Medical

Select Medical Holdings Corporation, through its subsidiary, Select Medical Corporation, operates acute care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), outpatient rehabilitation clinics, and occupational medicine centers in the United States. The company operates through four segments: Long Term Acute Care, Inpatient Rehabilitation, Outpatient Rehabilitation, and Concentra. The Long Term Acute Care segment consists of hospitals that provide services for heart failure, infectious disease, respiratory failure and pulmonary disease, surgery requiring recovery, renal disease, neurological events, and trauma. As of December 31, 2017, it operated 100 LTCHs in 27 states. The Inpatient Rehabilitation segment offers therapy and rehabilitation treatments, including rehabilitative services for brain and spinal cord injuries, strokes, amputations, neurological disorders, orthopedic conditions, pediatric congenital or acquired disabilities, and cancer. As of December 31, 2017, it operated 24 IRFs in 10 states. The Outpatient Rehabilitation segment operates rehabilitation clinics that provide physical, occupational, and speech rehabilitation programs and services; and specialized programs, such as functional programs for work related injuries, hand therapy, post-concussion rehabilitation, and athletic training services. As of December 31, 2017, it operated 1,616 facilities in 37 states and the District of Columbia The company's Concentra segment operates and provides medical centers and contract services at employer worksites and Department of Veterans Affairs community-based outpatient clinics (CBOCs) that deliver occupational medicine, consumer health, physical therapy, and veteran's healthcare services. This segment operated 312 medical centers, 105 onsite clinics at employer worksites, and 32 Department of Veterans Affairs CBOCs in 43 states. Select Medical Holdings Corporation was founded in 1996 and is headquartered in Mechanicsburg, Pennsylvania.

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