# Encompass Health (EHC.US)

Canonical: https://gigainvestors.com/s/EHC

Analysis as of: 2026-10-16T07:28:13.064Z. Financial observations: FY1996–FY2026.

Listing currency: USD. Reporting currency: USD.

## Verdict

Not a wonderful business

Quality tests for Buy: not passed (profit record: pass; earnings resilience is evidence only). Published buy qualification: no.

Share price: $127.77 per share; close as of 2026-10-15.

Estimated value: low $70.73 per share, central $99.71 per share, high $117.06 per share. Buy at or below the central value $99.71 per share. Valuation as of 2026-10-16T07:28:13.064Z; scenarios are not confidence intervals.

Expected annual return: 8.5% at the stated quote. About 8.5% a year at today's price (required return 10.0%). required return 10.0% a year (10% floor; US 10-year bond 5.1% + 4 points).

## Checklist

### understandable: pass

- 1 revenue decline in the last 10 years (informational)

- Financial history: 10 years

- Years with declining revenue: 1

- Years with a net loss: 0

- Operating margin variation: 0.32×

Chart: Operating margin; fiscal year observations.

- FY2017: 0.17×

- FY2018: 0.16×

- FY2019: 0.15×

- FY2020: 0.19×

- FY2021: 0.16×

- FY2022: 0.14×

- FY2023: 0.36×

- FY2024: 0.16×

- FY2025: 0.18×

- LTM to Jun 2026: 0.18×

### moat: fail

- Recent gross margin fell 53.9pp below the typical margin (limit 4pp)

- ROIC, median of available years: 21.5%

- ROIC, second-lowest year: 14.2%

- Typical minus recent gross margin: 53.9 pp

- Typical gross margin (annual median): 95.5%

- Recent gross margin (lower of latest and 3-year median): 41.6%

- Years with nonpositive capital: 0

- Capital spending / revenue: 11.7%

- ROIC including acquisitions, ten-year median: 7.0%

Chart: ROIC excluding acquisitions; fiscal year observations.

- FY2016: 24.0%

- FY2017: 26.9%

- FY2018: 31.9%

- FY2019: 16.2%

- FY2020: 14.2%

- FY2021: 12.8%

- FY2022: 16.2%

- FY2023: 42.7%

- FY2024: 20.3%

- FY2025: 22.8%

### economics: pass

- Owner earnings / net income, 5-yr: 0.89×

- Cash conversion uses consolidated totals: No

- Owner earnings, five-year total: $1.8B

- Net income, five-year total: $2.1B

- Return on incremental invested capital: 20.6%

- Working capital / revenue, annual change: -0.4 pp

- Working capital / revenue, change between three-year averages: -2.6 pp

- Working capital / revenue, final three-year average: 8.7%

Chart: Annual owner cash / profit; fiscal year observations.

- FY2021: 0.82×

- FY2022: 0.48×

- FY2023: 0.98×

- FY2024: 1.00×

- FY2025: 0.99×

### management: pass

- Historical market-dollar context (not the management verdict): 2016 to 2025 (9 years)

- buybacks leaned toward cheaper years (informational)

- ROIC first 3 years vs last 3 years: 26.9% vs 22.8%

- Per-share earnings: 1.98 to 4.46 (three-year endpoint medians)

- Management verdict uses per-share economic progress: Yes

- Ordinary dilution, 10-year annual growth: -2.1%

- Ordinary dilution, 5-year annual growth: 0.5%

- Market cap gain: $5.7B

- Cumulative retained earnings: $2.7B

- Diluted shares, 10-year annual growth: -2.1%

- Diluted shares, 5-year annual growth: 0.5%

- $1 test, starting fiscal year: FY2016

- $1 test, ending fiscal year: FY2025

- Per-share value growth: 10.7%

- Per-share value change: $2.48

- Per-share value, starting three-year median: $1.98

- Per-share value, ending three-year median: $4.46

- Buybacks concentrated in cheaper years (correlation): 0.04

- Average buyback yield: 0.5%

- Buyback history: 10 years

- Debt-funded buybacks: No

- Acquisition spending: $465M

- Cumulative net income, 10 years: $3.5B

- ROIC, first three-year median: 26.9%

- ROIC, last three-year median: 22.8%

Chart: Earnings per share; fiscal year observations.

- FY2016: $1.98

- FY2017: $2.17

- FY2018: $2.33

- FY2019: $2.87

- FY2020: $2.85

- FY2021: $4.11

- FY2022: $2.70

- FY2023: $3.47

- FY2024: $4.46

- FY2025: $5.54

### accounting: pass

- Sloan accruals: -8.6%

- Receivables to sales index (DSRI): 0.94×

- Restructuring years, last five: 0

- Stock compensation / operating cash flow: 4.8%

- Earnings backed by cash: Yes

- Operating cash / earnings: 2.08×

- Accounting red flags: 0

- Goodwill and intangibles / equity: 0.67×

Chart: Sloan accruals; fiscal year observations.

- FY2016: -7.6%

- FY2017: -7.9%

- FY2018: -9.0%

- FY2019: -4.5%

- FY2020: -6.5%

- FY2021: -4.4%

- FY2022: -7.7%

- FY2023: -8.2%

- FY2024: -8.4%

- FY2025: -8.6%

## Holders

- [Allen Bond](https://gigainvestors.com/JIM): tracked 13F investor; follow the investor page for holding quarter and amounts.

## Price story

Price needs cash profits to grow 9.3% a year for ten years · sales +4.6%

Story as of 2026-10-16T09:58:40.916Z; price observation 2026-10-15.

Price needs cash profits to grow 9.3% a year for ten years

- 2025-04-28: Encompass Health Beats Q1 Earnings Estimates, Ups '25 EPS View ([finance.yahoo.com](https://finance.yahoo.com/news/encompass-health-beats-q1-earnings-145900003.html))

- 2025-08-13: EHC Q2 Deep Dive: Discharge Growth and Capacity Expansion Drive Upbeat Outlook ([finance.yahoo.com](https://finance.yahoo.com/news/ehc-q2-deep-dive-discharge-034127779.html))

- 2025-09-09: Encompass Health Flexes Its Muscle: Margins Widen as Volumes Climb ([finance.yahoo.com](https://finance.yahoo.com/news/encompass-health-flexes-muscle-margins-135200083.html))

- 2026-02-09: EHC Q4 Deep Dive: Labor Cost Control and Capacity Expansion Drive Outperformance ([finance.yahoo.com](https://finance.yahoo.com/news/ehc-q4-deep-dive-labor-152053568.html))

- 2026-05-06: Encompass Health Q1 EPS Tops, Revenues Climb on Solid Discharges ([finance.yahoo.com](https://finance.yahoo.com/sectors/healthcare/articles/encompass-health-q1-eps-tops-154500421.html))

- 2026-08-07: Encompass Health Beats Q2 Earnings Estimates, Raises '26 View ([finance.yahoo.com](https://finance.yahoo.com/healthcare/articles/encompass-health-beats-q2-earnings-154700180.html))

### Sales · FY2025–2026

sales +4.6%; source https://www.sec.gov/Archives/edgar/data/785161/000078516126000081/ehc-20251231.htm; observed 2026-02-26.

- FY2017: $3.9B 

- FY2018: $4.3B 

- FY2019: $4.6B 

- FY2020: $3.6B 

- FY2021: $4.0B 

- FY2022: $4.3B 

- FY2023: $4.8B 

- FY2024: $5.4B 

- FY2025: $5.9B 

- FY2026: $6.2B 

### Gross margin · FY2025

gross margin 95.7%; source https://www.sec.gov/Archives/edgar/data/785161/000078516126000081/ehc-20251231.htm; observed 2026-02-26.

- FY2016: 96.2% 

- FY2017: 96.2% 

- FY2018: 96.3% 

- FY2019: 96.4% 

- FY2020: 95.2% 

- FY2021: 42.4% 

- FY2022: 40.3% 

- FY2023: 41.3% 

- FY2024: 41.6% 

- FY2025: 95.7% 

## Owner memo

Memo as of 2026-10-16T08:06:05.509Z.

### How it makes money

Operates in medical care facilities; annual sales are USD 5.9 billion.

- Source: https://www.sec.gov/Archives/edgar/data/785161/000078516126000081/ehc-20251231.htm (filed 2026-02-26); FY2025: revenue 5935200000; grossProfit 5680800000; margin = grossProfit / revenue.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-10-16); EHC.US: Encompass Health Corporation operates inpatient rehabilitation hospitals in the United States and Puerto Rico. The company offers specialized rehabilitative treatment, using technology and therapy, on an inpatient basis for patients recovering from a major injury or illness and seeking to regain functional ability, independence, and quality of life; medical, nursing, therapy, and ancillary services; and rehabilitative care to patients who are recovering from conditions, such as stroke and other neurological disorders, cardiac and pulmonary conditions, brain and spinal cord injuries, complex orthopedic conditions, and amputations. It offers services through the Medicare program to the federal government, managed care plans and private insurers, state governments, and other patients. The company was formerly known as HealthSouth Corporation and changed its name to Encompass Health Corporation in January 2018. Encompass Health Corporation was incorporated in 1984 and is based in Birmingham, Alabama.

### Why customers stay

Margins ranged from 41.3% to 95.7% during 2023–25; it earns 21.5% on its capital.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2023: grossProfit / revenue = 41.3%.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2024: grossProfit / revenue = 41.6%.

- Source: https://www.sec.gov/Archives/edgar/data/785161/000078516126000081/ehc-20251231.htm (filed 2026-02-26); FY2025: grossProfit / revenue = 95.7%.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); 10-year return on capital observations [[2016,0.23993112116898704],[2017,0.26929406049531257],[2018,0.31909245486941445],[2019,0.16239726802839274],[2020,0.1418261311536059],[2021,0.1281798289660201],[2022,0.162468281321012],[2023,0.42736455250203353],[2024,0.2026373574221508],[2025,0.2276626051742575]]; median 0.21514998129820415. ROIC follows the displayed moat series; financial companies use return on tangible equity.

### Where the cash goes

Spends 71.7% of cash earnings on expansion; earns 20.6% on new investment.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2016: growth capex 30300000; upkeep 172600000; owner earnings 247600000. Growth capex / owner earnings = 0.12237479806138933.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2017: growth capex 61200000; upkeep 183800000; owner earnings 271100000. Growth capex / owner earnings = 0.22574695684249355.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2018: growth capex 70800000; upkeep 199700000; owner earnings 292300000. Growth capex / owner earnings = 0.24221690044474856.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2019: growth capex 134875489.10095966; upkeep 269224510.89904034; owner earnings 318101563.48681504. Growth capex / owner earnings = 0.4240013397688003.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2020: growth capex 0; upkeep 408200000; owner earnings 126071366.59436008. Growth capex / owner earnings = 0.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2021: growth capex 236333233.9850552; upkeep 314866766.0149448; owner earnings 336332610.2176193. Growth capex / owner earnings = 0.7026771321167433.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2022: growth capex 198302117.04936528; upkeep 385797882.9506347; owner earnings 128802117.04936528. Growth capex / owner earnings = 1.5395874042455615.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2023: growth capex 300528457.69593674; upkeep 282571542.30406326; owner earnings 343328457.69593674. Growth capex / owner earnings = 0.8753380355149437.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); FY2024: growth capex 342900000; upkeep 299600000; owner earnings 455700000. Growth capex / owner earnings = 0.7524687294272547.

- Source: https://www.sec.gov/Archives/edgar/data/785161/000078516126000081/ehc-20251231.htm (filed 2026-02-26); FY2025: growth capex 403480335.3155692; upkeep 332919664.6844308; owner earnings 562460841.8045985. Growth capex / owner earnings = 0.7173483117883257.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); Incremental return on capital 0.2057245113345508, from the economics test's unchanged annual inputs.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); Dividend observations: [[2016,83800000],[2017,91500000],[2018,100800000],[2019,108700000],[2020,111900000],[2021,112400000],[2022,99000000],[2023,60400000],[2024,62800000],[2025,71100000]]. Zero only counted when supported by a complete cash-flow statement.

- Source: https://www.sec.gov/Archives/edgar/data/785161/000078516126000081/ehc-20251231.htm (filed 2026-02-26); FY2025: cash repurchases 158000000 USD.

### Are managers owners

Insiders own 0.9% of the company.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-10-16); EHC.US SharesStats.PercentInsiders = 0.8670000000000001 percentage points; cache date 2026-10-16.

### What the price says

The price assumes cash profits grow 9.3% yearly over ten years; actual growth was 14.3%.

- Source: https://eodhd.com/financial-apis/stock-etfs-fundamental-data-feeds/ (filed 2026-02-26); Ten-year compound average after fade. Initial solved rate 0.12051919593651472. Price 127.77; FX 1; discount 0.1; same standard ten-year fade to terminal 0.03. FY2015 owner earnings/share 1.4422205943744735 → FY2025 5.503530741727969. Closing-price date 2026-10-15.

## Monthly share-price history (USD per share)

- 2016-10: $40.15 per share

- 2016-11: $41.67 per share

- 2016-12: $41.24 per share

- 2017-01: $38.82 per share

- 2017-02: $42.32 per share

- 2017-03: $42.81 per share

- 2017-04: $46.90 per share

- 2017-05: $45.33 per share

- 2017-06: $48.40 per share

- 2017-07: $42.56 per share

- 2017-08: $45.75 per share

- 2017-09: $46.35 per share

- 2017-10: $46.14 per share

- 2017-11: $49.95 per share

- 2017-12: $49.41 per share

- 2018-01: $52.92 per share

- 2018-02: $53.26 per share

- 2018-03: $57.17 per share

- 2018-04: $60.82 per share

- 2018-05: $64.75 per share

- 2018-06: $67.72 per share

- 2018-07: $75.63 per share

- 2018-08: $81.59 per share

- 2018-09: $77.95 per share

- 2018-10: $67.30 per share

- 2018-11: $75.21 per share

- 2018-12: $61.70 per share

- 2019-01: $66.84 per share

- 2019-02: $63.14 per share

- 2019-03: $58.40 per share

- 2019-04: $64.45 per share

- 2019-05: $58.92 per share

- 2019-06: $63.36 per share

- 2019-07: $63.84 per share

- 2019-08: $60.79 per share

- 2019-09: $63.28 per share

- 2019-10: $64.02 per share

- 2019-11: $70.71 per share

- 2019-12: $69.27 per share

- 2020-01: $77.03 per share

- 2020-02: $74.84 per share

- 2020-03: $64.03 per share

- 2020-04: $66.25 per share

- 2020-05: $73.25 per share

- 2020-06: $61.93 per share

- 2020-07: $68.08 per share

- 2020-08: $65.24 per share

- 2020-09: $64.98 per share

- 2020-10: $61.31 per share

- 2020-11: $80.58 per share

- 2020-12: $82.69 per share

- 2021-01: $80.40 per share

- 2021-02: $80.44 per share

- 2021-03: $81.90 per share

- 2021-04: $84.86 per share

- 2021-05: $85.79 per share

- 2021-06: $78.03 per share

- 2021-07: $83.25 per share

- 2021-08: $78.45 per share

- 2021-09: $75.04 per share

- 2021-10: $63.56 per share

- 2021-11: $57.62 per share

- 2021-12: $65.26 per share

- 2022-01: $62.04 per share

- 2022-02: $66.02 per share

- 2022-03: $71.11 per share

- 2022-04: $68.83 per share

- 2022-05: $65.54 per share

- 2022-06: $56.05 per share

- 2022-07: $50.62 per share

- 2022-08: $48.57 per share

- 2022-09: $45.23 per share

- 2022-10: $54.44 per share

- 2022-11: $58.48 per share

- 2022-12: $59.81 per share

- 2023-01: $62.45 per share

- 2023-02: $56.52 per share

- 2023-03: $54.10 per share

- 2023-04: $64.15 per share

- 2023-05: $62.02 per share

- 2023-06: $67.71 per share

- 2023-07: $66.03 per share

- 2023-08: $71.04 per share

- 2023-09: $67.16 per share

- 2023-10: $62.56 per share

- 2023-11: $65.17 per share

- 2023-12: $66.72 per share

- 2024-01: $71.04 per share

- 2024-02: $74.40 per share

- 2024-03: $82.58 per share

- 2024-04: $83.38 per share

- 2024-05: $86.39 per share

- 2024-06: $85.79 per share

- 2024-07: $92.94 per share

- 2024-08: $93.05 per share

- 2024-09: $96.64 per share

- 2024-10: $99.46 per share

- 2024-11: $102.94 per share

- 2024-12: $92.35 per share

- 2025-01: $99.27 per share

- 2025-02: $100.14 per share

- 2025-03: $101.28 per share

- 2025-04: $116.99 per share

- 2025-05: $120.90 per share

- 2025-06: $122.63 per share

- 2025-07: $110.11 per share

- 2025-08: $121.76 per share

- 2025-09: $127.02 per share

- 2025-10: $113.85 per share

- 2025-11: $116.22 per share

- 2025-12: $106.14 per share

- 2026-01: $94.53 per share

- 2026-02: $107.88 per share

- 2026-03: $96.73 per share

- 2026-04: $100.00 per share

- 2026-05: $105.85 per share

- 2026-06: $101.08 per share

- 2026-07: $111.07 per share

- 2026-08: $120.21 per share

- 2026-09: $121.49 per share

- 2026-10: $127.77 per share

## Annual estimated value (USD per share)

- FY2016: low $23.59 per share, central $27.74 per share, high $32.28 per share

- FY2017: low $23.74 per share, central $27.01 per share, high $31.37 per share

- FY2018: low $26.03 per share, central $30.32 per share, high $35.25 per share

- FY2019: low $31.70 per share, central $41.78 per share, high $48.89 per share

- FY2020: low $27.87 per share, central $31.55 per share, high $36.45 per share

- FY2021: low $30.25 per share, central $34.42 per share, high $39.98 per share

- FY2022: low $32.35 per share, central $36.81 per share, high $42.75 per share

- FY2023: low $41.90 per share, central $55.67 per share, high $65.13 per share

- FY2024: low $48.52 per share, central $65.70 per share, high $76.98 per share

- FY2025: low $65.49 per share, central $92.24 per share, high $108.26 per share

Historical values use today's bond yield for every fiscal year

Historical values use today's FX rate into trading currency for every fiscal year

Historical values use current restated fundamentals and current commodity classification; they are not point-in-time estimates

## Sources

[Original 10-K filing](https://www.sec.gov/Archives/edgar/data/785161/000078516126000081/ehc-20251231.htm); period 2025-12-31, filed 2026-02-26.

Estimates depend on assumptions and are not guarantees or investment advice. Underlying data remains subject to its source licenses; public reading does not grant bulk redistribution rights.