Encompass Health Corporation (NYSE:EHC): What Does The Future Look Like?

In December 2018, Encompass Health Corporation (NYSE:EHC) released its most recent earnings announcement, which revealed that the business gained from a small tailwind, eventuating to a single-digit earnings growth of 7.3%. Below, I've presented key growth figures on how market analysts view Encompass Health's earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

See our latest analysis for Encompass Health

Analysts' outlook for the upcoming year seems positive, with earnings growing by a robust 29%. This growth seems to continue into the following year with rates reaching double digit 34% compared to today’s earnings, and finally hitting US$434m by 2022.

Although it is helpful to understand the rate of growth year by year relative to today’s figure, it may be more valuable analyzing the rate at which the earnings are moving every year, on average. The pro of this approach is that it ignores near term flucuations and accounts for the overarching direction of Encompass Health's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 12%. This means, we can expect Encompass Health will grow its earnings by 12% every year for the next few years.

Next Steps:

For Encompass Health, I've put together three essential factors you should look at:

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Valuation: What is EHC worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether EHC is currently mispriced by the market.
3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of EHC? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at [email protected]. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.