About Encompass Health Corp
Encompass Health Corporation provides facility-based and home-based post-acute healthcare services in the United States. The company operates in two segments, Inpatient Rehabilitation, and Home Health and Hospice. The Inpatient Rehabilitation segment provides specialized rehabilitative treatment on an inpatient and outpatient basis to patients who are recovering from conditions, such as stroke and other neurological disorders, cardiac and pulmonary conditions, brain and spinal cord injuries, complex orthopedic conditions, and amputations. The Home Health and Hospice segment provides home health and hospice services primarily in the Southeast and Texas. Its home health services include a range of Medicare-certified home nursing services to adult patients in need of care comprising skilled nursing, medical social work, and home health aide services, as well as physical, occupational, speech therapy, and others.
This segment's hospice services comprise in-home services to terminally ill patients and their families. As of April 11, 2022, it operated 147 hospitals, 251 home health locations, and 96 hospice locations in 42 states and Puerto Rico. The company was formerly known as HealthSouth Corporation and changed its name to Encompass Health Corporation in January 2018. Encompass Health Corporation was founded in 1983 and is based in Birmingham, Alabama.
EHC operates in the Services | Healthcare | headquartered in Birmingham, Alabama | approximately 35,000 employees | led by CEO Mark J. Tarr.
The $12.8B question: What happens when a company this good becomes this expensive?
In the alphabet soup of healthcare investing, few stories capture the tension between innovation and regulation quite like Encompass Health Corp. The company stands at the intersection of scientific possibility and market reality.
At $12.8B in market capitalization, Encompass Health Corp (EHC) currently ranks #196 in our quantitative model, with a composite score of 76.6/100. That places it firmly in "Strong Buy" territory — our highest conviction rating.
But here's the thing about stocks priced for perfection: They leave no room for error.
The Numbers That Matter
Let's start with what's undeniably true. Our 6-factor model gives EHC the following scores:
| Factor | Score | Weight | Assessment |
|---|---|---|---|
| Quality | 76/100 | 30% | Strong |
| Value | 64/100 | 15% | Fair |
| Momentum | 74/100 | 25% | Accelerating |
| Investment | 42/100 | 10% | Moderate |
| Stability | 91/100 | 10% | Fortress |
| Short Interest | 44/100 | 10% | Normal |
The quality score of 76/100 is the headline here. It reflects profitability metrics that would make most CFOs weep with envy:
- ROE: 25.1%
- Net Margin: 11.8%
- Gross Margin: 45.9%
These aren't just good numbers. They're the kind of numbers that make EHC a "must-own" stock for institutional portfolios.
The Bull Case
"If you could design a business in a laboratory, it would look something like EHC."
The bull case writes itself:
- Quality is persistent. Academic research shows high-quality stocks outperform by 4-6% annually over long periods. EHC is quality defined.
- Momentum is real. With a momentum score of 74/100, the stock has been recognized by the market — and momentum tends to persist.
- The moat is deep. Companies with these margins don't lose them easily. The competitive position is entrenched.
The Bear Case
But here's what keeps value investors up at night:
- Valuation compression risk. At current levels, the stock is priced for continued perfection. Any stumble — a missed quarter, a competitive threat, a macro slowdown — could compress the multiple from 23.6x to the low 20s. That's a 20-30% decline without anything fundamentally "wrong."
- The crowded trade problem. When everyone owns a stock, who's left to buy? Momentum works until it doesn't.
- Mean reversion. Trees don't grow to the sky. At some point, growth decelerates.
The Valuation Framework
| Scenario | Assumption | Fair Value | Upside/Downside |
|---|---|---|---|
| Bear | Multiple compression to 20x | -20% | Downside |
| Base | Current trajectory continues | +10-15% | Modest upside |
| Bull | Momentum accelerates | +30-40% | Significant upside |
The risk-reward is ... fine. Not exceptional. Not terrible. Just fine.
The Bottom Line
Encompass Health Corp is exactly what it appears to be: a high-quality business with strong momentum trading at a premium price. Whether that's attractive depends entirely on what kind of investor you are.
For long-term, buy-and-hold investors, EHC is a core holding. For value investors or short-term traders, look elsewhere.
The company is priced for perfection — and in markets, as in life, perfection is a fragile thing.
⭐⭐⭐⭐⭐ Rating: 5-Star Strong Buy
Score: 76.6/100 | Rank: #196 of 3,571 stocks
Sector: Healthcare
This analysis reflects the views of Blank Capital Research as of February 16, 2026. It is not investment advice. Past performance does not guarantee future results.