Encompass Health combines a regulated national rehabilitation moat, 8.5% base-case growth, and a probability-weighted five-year target of $215.62 against a $123.59 share price.
Overview
Encompass Health is the national pure-play leader in inpatient rehabilitation, operating 176 hospitals across 39 states and Puerto Rico with 11,641 licensed beds. Since spinning off Enhabit in July 2022, it has concentrated on a scalable, high-margin facility model serving essential post-acute needs. Approximately 92% of admissions come from acute-care hospitals and emergency departments, while Medicare Fee-For-Service contributes 65.8% of net operating revenue. **Q2 2026 demonstrated strong momentum:** revenue rose 9.6% year over year to $1,597.4 million, Adjusted EBITDA increased 9.2% to $348.0 million, and Adjusted EPS grew 10.7% to $1.55, beating consensus by 1.8%, 2.9%, and 4.7%. Discharges increased 5.6% to 68,895 and revenue per discharge rose 3.9% to $22,521. Management raised 2026 guidance for the second time, targeting $6,410 million–$6,490 million of revenue, $1,365 million–$1,395 million of EBITDA, and $6.02–$6.25 of EPS. At $123.59, valuation is 18.73x forward P/E and approximately 9.0x–10.0x EV/EBITDA. The key catalysts are de novo capacity, 2027 small-format hospitals, clinical technology, and buybacks; the five-year probability-weighted target is $215.62.