ENSG - Ensign Group: Priced On Asset Growth Supported By Fundamentals

2024-06-12 08:48:38 ET

Summary

• ENSG continues to show growth in same-facility operations and reinvestment of earnings to build assets.
• Q1 FY 2024 earnings breakdown shows continued top-line growth and affirmed guidance for the year.
• Factors supporting additional price change include market pricing on asset growth vs. earnings and growth in earnings power.

Investment Summary

Since my last publication on The Ensign Group, Inc. ( ENSG ), titled “ Unit economics ratcheting back to pre-pandemic highs” , the position has clipped another 32% gain. In that report, I noted several highlights in the ENSG investment debate, including:

1. Continued growth in same-facility operations, up 540 basis points year over year in Q1 2023.

2. Input from Standard Bearer's assets, the company’s subsidiary captive healthcare REIT. This structure provides exposure to skilled labour (a return on talent aka human capital) and the asset side of healthcare markets (return on tangible capital).

3. Continued reinvestment of earnings to build cumulative asset base whilst (i) maintaining pre-tax margins on (ii) continued sales growth.

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