Credit Suisse: Encompass Health Is The Market Leader In Rehab, Home Health

Encompass Health Corp (NYSE: EHC) is the sector leader in the rehab and the home health sectors, according to Credit Suisse. 

The Analyst

Credit Suisse's A.J. Rice initiated coverage of Encompass Health Corp with an Outperform rating and $58 price target.

The Thesis

The company has a growing rehab and home health business, Rice said in a Wednesday note. (See the analyst's track record here.) 

Encompass Health Corp has 22 percent of all inpatient rehabilitation beds and serves 29 percent of all Medicare patients, the analyst said. The IRF business makes 81 percent of the company's revenue, and Encompass managed to decrease its net debt/LTM EBITDA from 4.6 percent to 3.1 percent, said Rice.

The $58 price target is based on a valuation of 9.5 times Credit Suisse's 2019 EBITDA estimate and the stock is trading at 9.5 times the 2018 EBITDA estimate. Two main competitors are trading at 8.8 times and the broader peer average is 10.7 times, Rice said. Credit Suisse likes the stock because of its solid balance sheet, dividend and market leadership position, and sees it as a compelling name, Rice said. 

The Price Action

Encompass Health was up about 2.36 percent near the end of Wednesday's trading session. 

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