When Should You Buy The Ensign Group, Inc (NASDAQ: ENSG)?


The Ensign Group, Inc (NASDAQ: ENSG), a healthcare firm with a market capitalization of $1.9 billion, saw its share price increase by 30.1% over the prior three months. As a small-cap stock with decent coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. Is there still an opportunity here to buy? Let’s examine The Ensign Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Is The Ensign Group Still Cheap?

The stock seems fairly valued at the moment according to 9 separate valuation analyses. Shares are trading roughly 5% above its intrinsic value. This means if you were to buy The Ensign Group today, you’d be paying a reasonable price for it. If you believe that the stock is really worth $33.65, then there isn’t much room for the share price to appreciate beyond where it’s currently trading.

The Ensign Group, Inc Valuation Detail
Analysis Model Fair Value Upside (Downside)
10-yr DCF EBITDA Exit $42.08 18.7%
5-yr DCF EBITDA Exit $46.37 30.8%
Peer EBITDA Multiples $43.24 22.0%
10-yr DCF Growth Exit $29.68 -16.3%
5-yr DCF Growth Exit $29.48 -16.8%
Peer P/E Multiples $42.27 19.3%
Dividend Discount Model $22.16 -37.5%
Dividend Discount Model (multi-stage) $29.30 -17.3%
Earnings Power Value $18.22 -48.6%
Average $33.65 -5.1%

Click on any of the analyses above to view the latest model with real-time data.

In addition, it seems like The Ensign Group’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its beta of 0.48.

What Does The Future Of The Ensign Group Look Like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations.

The Ensign Group projected revenue chartsource: finbox.io data explorer

With The Ensign Group’s relatively muted top-line growth of 4.7% expected over the next five years on average, growth doesn’t seem like a key catalyst for a buying decision, at least in the short to medium-term.

How This Impacts You

Many investors separate stocks into value and growth categories based on quantitative metrics. However, one of the most famous investors in the world views this as foolish. In Warren Buffett’s 1992 letter to Berkshire Hathaway shareholders, Buffett touches upon a subject at odds with much of the investment industry:

“Most analysts feel they must choose between two approaches customarily thought to be in opposition: ‘value’ and ‘growth.’ Indeed, many investment professionals see any mixing of the two terms as a form of intellectual cross-dressing. We view that as fuzzy thinking… In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value.”

While investors tend to categorize stocks into value and growth, some of the most successful investors view growth as simply one component of a company’s value.

The Ensign Group’s future growth is relatively low and the stock appears fairly valued at the moment according to our valuation models. As a shareholder, you may have already conducted your fundamental analysis on the company and the stock’s recent appreciation may have been expected. Therefore, it may be time for investors to take some chips off the table. For prospective investors looking to purchase shares of The Ensign Group, it may be worth holding off until the stock develops a larger margin of safety.

But before making an investment decision, I recommend you continue to research The Ensign Group to get a more comprehensive view of the company by looking at:

Risk Metrics: how is The Ensign Group’s financial health? Find out by viewing our financial leverage data metric which plots the dollars in total assets for each dollar of common equity over time.

Valuation Metrics: how much upside do shares of The Ensign Group have based on Wall Street’s consensus price target? Take a look at our analyst upside data explorer that compares the company’s upside relative to its peers.

Efficiency Metrics: is management becoming more or less efficient over time? Find out by analyzing the company’s asset turnover ratio which measures the dollars in revenue a company generates per dollar of assets.

As of this writing, I did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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