The Ensign Group trades at $123.75 per share and has stayed right on track with the overall market, losing 15.4% over the last six months while the S&P 500 is down 13.9%. This might have investors contemplating their next move.

Given the weaker price action, is now an opportune time to buy ENSG? Find out in our full research report, it’s free.

Why Does ENSG Stock Spark Debate?

Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ:ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.

Two Positive Attributes:

1. Elevated Demand Drives Higher Sales Volumes

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Specialized Medical & Nursing Services company because there’s a ceiling to what customers will pay.

The Ensign Group’s units sold punched in at 2.47 million in the latest quarter, and over the last two years, averaged 14.3% year-on-year growth. This performance was impressive and shows its offerings have a unique value proposition (and perhaps some degree of customer loyalty).

2. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

The Ensign Group’s EPS grew at an astounding 19.7% compounded annual growth rate over the last five years, higher than its 15.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

One Reason to be Careful:

New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, The Ensign Group’s ROIC has decreased over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.

Final Judgment

The Ensign Group’s positive characteristics outweigh the negatives. With the recent decline, the stock trades at 20.1× forward price-to-earnings (or $123.75 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.

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