Is Encompass Health (EHC) Stock Undervalued Right Now?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to...
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One company to watch right now is Encompass Health (EHC). EHC is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 14.87. This compares to its industry's average Forward P/E of 27.32. Over the last 12 months, EHC's Forward P/E has been as high as 24.38 and as low as 14.60, with a median of 20.97.
Investors should also note that EHC holds a PEG ratio of 0.83. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. EHC's PEG compares to its industry's average PEG of 0.97. Within the past year, EHC's PEG has been as high as 9.86 and as low as 0.81, with a median of 1.43.
Investors should also recognize that EHC has a P/B ratio of 3.13. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 3.77. Within the past 52 weeks, EHC's P/B has been as high as 4.51 and as low as 3.07, with a median of 4.03.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. EHC has a P/S ratio of 1.38. This compares to its industry's average P/S of 1.61.
Finally, investors will want to recognize that EHC has a P/CF ratio of 10.69. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. EHC's current P/CF looks attractive when compared to its industry's average P/CF of 23.49. Within the past 12 months, EHC's P/CF has been as high as 16.86 and as low as 10.48, with a median of 14.85.
These are just a handful of the figures considered in Encompass Health's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that EHC is an impressive value stock right now.
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