A strong stock as of late has been Encompass Health (EHC). Shares have been marching higher, with the stock up 3.8% over the past month. The stock hit a new 52-week high of $129.96 in the previous session. Encompass Health has gained 20.4% since the start of the year compared to the 3.9% move for the Zacks Medical sector and the 25.1% return for the Zacks Medical - Outpatient and Home Healthcare industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on August 5, 2026, Encompass Health reported EPS of $1.55 versus consensus estimate of $1.48.
For the current fiscal year, Encompass Health is expected to post earnings of $6.08 per share on $6.46 in revenues. This represents a 11.56% change in EPS on a 8.85% change in revenues. For the next fiscal year, the company is expected to earn $6.6 per share on $7 in revenues. This represents a year-over-year change of 8.53% and 8.3%, respectively.
Valuation Metrics
Though Encompass Health has recently hit a 52-week high, what is next for Encompass Health? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). The individual style scores for Value, Growth, Momentum and the combined VGM Score run from A through F. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Encompass Health has a Value Score of B. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 21X current fiscal year EPS estimates, which is not in-line with the peer industry average of 21X. On a trailing cash flow basis, the stock currently trades at 14.4X versus its peer group's average of 15.8X. Additionally, the stock has a PEG ratio of 2.59. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Encompass Health currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Encompass Health meets the list of requirements. Thus, it seems as though Encompass Health shares could have potential in the weeks and months to come.
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Encompass Health Corporation (EHC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).