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Acquisitions Aid Revenue Growth at Ensign Group (ENSG)


The Ensign Group, Inc. ENSG boasts a strong inorganic growth story, with more than 234 acquisitions made over 18 years. Its historical growth has been mainly driven by its expertise in acquiring real estate or leasing post-acute care operations and transforming those into market leaders. With each acquisition, the company had sharpened its expertise, both clinically and financially.

Recently, Ensign Group acquired real estates and operations of McCall Rehabilitation and Care Center, a 40-bed skilled nursing facility located in McCall, ID. The acquisition was effective on Jul 1, 2018.

This acquisition reflects the company’s efforts to deepen its reach in the skilled nursing space, which has a huge demand from the aging U.S. population.

The company’s acquisition strategy consists of applying its core operating expertise to improve these operations, both clinically and financially. In years, where pricing has been high, the company has focused on the integration and improvement of its existing operating subsidiaries while limiting its acquisitions to strategically situated properties.

Ensign Group’s growth strategies and acquisitions have driven its top line, which has been growing since 2012. Revenues have witnessed a five-year CAGR (2012-17) of 17.6%. The consistent rise in the metric was majorly driven by the company’s Transitional & Skilled Services, accounting for nearly 84% of the total revenues in 2017. Management expects its 2018 annual revenues to be $2-$2.06 billion, up 13% year over year.

Further, the company has been taking several initiatives to efficiently deploy its capital. Frequent share repurchases and dividend payments at regular intervals have helped the company retain investors’ confidence in this stock.

Ensign Group has been a dividend-paying company since 2002 and has increased its payout annually for the past 16 years. It raised the dividends by in the first quarter of 2018. We believe that the company’s financial strength will continue buoying investors’ confidence in the stock.

Shares of the company have gained 79.3% in a year’s time compared with the industry’s decline of 0.08%.

Ensign Group currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the medical space are Genesis Healthcare, Inc. GEN, PRA Health Sciences, Inc. PRAH, LifePoint Health Inc. LPNT. Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Genesis Healthcare’s current year earnings growth rate is expected to be 18.8%.

Life Point Health’s current year earnings growth rate is expected to be 18.5%.

PRA Health surpassed earnings estimates in each of the trailing four quarters , with an average positive surprise of 4.9%.

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