ENSIGN GROUP, INC (ENSG): what the price requires

At today's price, ENSIGN GROUP, INC (ENSG) is priced for +9.3% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-19 · Source: https://boothcheck.com/report/ENSG

Headline

FieldValue
TickerENSG
CompanyENSIGN GROUP, INC
Current price$169.77/sh
CompositionSkilled Services 97% / Standard Bearer 3%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed1.3%
Operating margin today8.4%
Margin compression implied-7.1pp
Implied growth9.3%
Multiple paid27x operating income

The operating-margin requirement is derived from the framework's value band at year 8, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 7.1% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~8.9pp.

Reconcile: at the x-ray's 9.3% required return this reads ~5.3 years; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.36σ
cohort percentile (of 113 peers)69
implied end-window share0%

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.29x5expensive
Earnings2.44x5expensive
Relative1.30x5expensive
Growth0.69x3justifies

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.6%); the inversion above states its own rate.

Per-Model Detail (n=18)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$428.160.40xyesFCF base $0.7B, growth 19% (input: historical growth), terminal g 4.0%, WACC 7.6%, 6yr projection
DCF Exit MultipleGrowth$244.720.69xyesExit EV/EBITDA: 19.2x / 21.2x / 23.2x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$130.941.30xyesP/E 20.95x (blended: static sector reference 18x + trailing (TTM) 28x), scenarios: 17.1x / 20.9x / 24.8x (bear / base = reference held flat / bull), EV/EBITDA 14.76x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$65.952.57xyesBV/sh $39.72, ROE (TTM) 15.4%, ke 9.3%
Two-Stage Excess ReturnAsset$83.932.02xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$176.250.96xyesRev $5.3B, growth 19% (input: historical growth; tapered), Terminal P/S: 1.6x / 1.9x / 2.3x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair ValueRelative$97.351.74xyesEPS $6.14, growth 16% (input: historical EPS growth), PEG=1.76 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$26.736.35xyesNormalized EBIT (5y avg op income, one-time charges added back) $0.33B × (1−22%) / WACC 7.6% → EPV (no growth)
Residual IncomeAsset$85.841.98xyesBV $39.72 + 5yr PV of (ROE (TTM) 15.4% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$74.082.29xyes√(22.5 × EPS $6.14 × BVPS $39.72) — Graham's conservative floor
EV/EBITDA RelativeRelative$83.732.03xyesEBITDA $0.56B × sector EV/EBITDA 12.0x
FCF YieldEarnings$78.852.15xyesFCF $592.2M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$69.512.44xyesSBC-adj FCF $0.54B (FCF $0.59B − SBC $0.05B) capitalized at Kₑ
Ben Graham FormulaEarnings$198.120.86xyesEPS $6.14 × (8.5 + 2×15.0%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$12.4713.61xyesBV $39.72 × (ROIC 2.4% / WACC 7.6%)
P/Sales SectorRelative$221.350.77xyesRevenue $5.27B × sector P/S 2.5x
PEG Fair ValueRelative$146.021.16xyesEPS $6.14 × (PEG 1.5 × growth 15.9% (input: historical EPS growth)) → PE 23.8x
Earnings YieldEarnings$66.382.56xyesEPS $6.14 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net cash$450.8m
Net debt / NOPAT (after-tax)-1.36x (net cash)
Net debt / operating income (pre-tax)-1.06x (net cash)
Interest coverage53.5x
Share count CAGR (dilution)1.2%
Burning cashno

Bullet Takeaways

Bull Case

Ensign is a capital-allocation story before it is a healthcare story, and the allocation is exceptional. The model is deceptively simple: acquire skilled-nursing operations that are underperforming, often losing money, and apply a decentralized operating playbook that pushes accountability down to local leaders who improve occupancy, skilled-patient mix, and cost discipline. The company describes its approach as attracting higher-acuity patients by maintaining and enhancing its reputation for quality, and it added 46 new operations during 2025 alone (ENSG FY2025 10-K, accession 0001125376-26-000007). In the first quarter of 2026 it added 22 more across Texas, Arizona, and Wisconsin and committed about $342 million for additional Texas facilities and real estate. This is a repeatable, decade-long compounding machine, and the runway is large because the skilled-nursing industry is fragmented and full of turnaround candidates.

The operating results show the playbook working. First-quarter revenue rose 18.4 percent to $1.39 billion, GAAP EPS of $1.67 and adjusted EPS of $1.85 both grew about 22 percent, and the adjusted figure beat the $1.78 estimate. The quality is in the occupancy: same-facility occupancy reached 84.3 percent and transitioning-facility occupancy 85.1 percent, up 2.3 and 3.8 points respectively, with skilled mix improving. Rising occupancy in acquired facilities is exactly how the turnaround model converts cheap acquisitions into earnings. Management raised 2026 EPS guidance to $7.48 to $7.62 and revenue to $5.81 to $5.86 billion on the strength of the quarter and the deal pipeline.

The balance sheet is what makes the flywheel durable. Ensign carries about $451 million of net cash with only $144 million of gross debt, and interest coverage near 57 times, so it can fund acquisitions internally without straining the equity. Trailing ROE of about 15.4 percent on a $39.72 book value per share shows the returns are real. The growth-DCF reaches the price while the static methods lag, the model's signature for a business whose compounding the asset frames cannot capture, and the inversion band sits well above the current price at $251 to $336. Analyst targets cluster from the low $180s into the $220s. The bull case is a proven, self-funded acquisition compounder in a fragmented industry, with rising occupancy and a balance sheet built to keep buying.

Bear Case

The bear case is moat erosion, and for a skilled-nursing operator the moat is always being chipped at by the two forces the company least controls: reimbursement and labor. Start with reimbursement, because it is the larger structural threat. Medicare and Medicaid were about 69 percent of service revenue in the first quarter, which means the majority of Ensign's revenue is set by government payers whose rates, regulatory policies, and payer reviews can change. The company's own filing warns that changes in requirements, data reporting, and measurement standards could have a material adverse effect on revenues and results, and that managed-care programs may push reduced payment rates and delay payments (ENSG FY2025 10-K, accession 0001125376-26-000007). The turnaround model depends on improving the economics of acquired facilities, but if the underlying reimbursement rate compresses, the ceiling on those economics falls for the whole portfolio at once. That is moat erosion that no operating excellence fully offsets.

The second pressure is labor, which is both a cost and a regulatory risk. Skilled nursing is intensely labor-intensive, and wage inflation and staffing shortages directly compress margins. The federal staffing mandate that would have set minimum nurse-hour requirements was rescinded in early 2026 after an industry lawsuit, which is a near-term relief, but the episode shows how exposed the model is to regulation that can raise the cost of care overnight. Ensign has done well managing this, cutting agency-staffing spend to roughly a quarter of pandemic levels, but a re-imposition of staffing rules or a tight labor market would erode the cost advantage that the turnaround model relies on.

The third issue is that the price assumes the acquisition machine keeps converting at historical rates. The static valuation methods read the stock as richly valued: earnings power value lands near $27, the simple excess-return method near $66, and the relative-valuation read near $118, all reflecting that the current operating margin of 8.5 percent and the reimbursement-capped economics do not support the price on a no-growth basis. The model works only as long as Ensign can find underperforming facilities at attractive prices and improve them faster than reimbursement and labor pressures erode the base. Integration risk rises with scale, and at 71 acquisitions since 2025 the company is digesting a great deal at once. The growth is real, but it is built on a foundation of government payers and scarce labor, and the price gives little credit to how quickly either can turn against the operating model.

Valuation

Ensign is characterized as a durability premium: the asset, earnings-power, and peer-multiple methods all read it richly valued, and only the growth-DCF reaches the price. That is the unusual feature here: the inversion band sits above the trading price, suggesting the market is not paying full freight for the compounding the model assumes.

The X-ray shows the growth-versus-static split. The perpetual-growth DCF lands near $429 on 19 percent historical growth and the discounted-future-market-cap method right at the price near $153 on the same growth tapered, while the exit-multiple DCF near $221 also exceeds the price. The static frames are well below: the simple excess-return method near $66 and the two-stage version near $84 off a $39.72 book value per share, residual income near $86, and earnings power value near $27 on normalized EBIT. The relative-valuation read at $117.78 on an 18 times sector P/E is the closest peer anchor and still below the price.

The synthesis is that this is a growth-and-quality premium where the inversion is more generous than the static frames. The deciding variable is the durability of the acquisition flywheel against reimbursement and labor pressure. If Ensign keeps buying and improving facilities at its historical rate, the growth methods and the inversion band above the price are the right read, and the stock has room. If reimbursement compresses or labor costs spike, the static floors near $27 to $108 are what the price would test. The balance sheet, net cash with 57 times interest coverage, removes financial risk from the equation, so the bet is purely on operational execution and the government-payer environment holding.

Catalysts

The first-quarter 2026 report on May 1 was the most recent catalyst. Revenue of $1.39 billion rose 18.4 percent, GAAP EPS of $1.67 and adjusted EPS of $1.85 grew about 22 percent with the adjusted figure beating the $1.78 estimate, and same-facility and transitioning occupancy rose to 84.3 percent and 85.1 percent. Management raised full-year 2026 guidance to $7.48 to $7.62 in EPS and $5.81 to $5.86 billion in revenue. The acquisition pace is the recurring catalyst: 22 new operations in the quarter, about $342 million committed for Texas facilities and real estate, and 71 acquisitions since the start of 2025. The next print tests whether occupancy and skilled mix keep climbing in the acquired book.

The forward catalysts are regulatory and operational. Reimbursement is the dominant variable, with Medicare and Medicaid about 69 percent of service revenue, so any rate update or policy change is consequential. On labor, the rescission of the federal staffing mandate in early 2026 was a positive, and the company has cut agency-staffing spend to roughly a quarter of pandemic levels, but staffing-rule developments and wage trends remain the key cost watch items. Integration execution as the company digests a large recent acquisition cohort is the operational risk. Analyst targets span the low $180s to the $220s with a buy-leaning consensus, so continued occupancy gains and disciplined deal-making are the swing factors.

Sources: StockTitan ENSG Q1 2026 results, Investing.com Q1 2026 transcript, McKnights staffing mandate, MarketBeat ENSG forecast.

Peer Cohorts (Per Segment, With Filing Citations)

Skilled Services (reported)

Standard Bearer (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive ENSG report on boothcheck