Encompass Health Corporation (NYSE:EHC), might not be a large cap stock, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$80.81 and falling to the lows of US$61.18. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Encompass Health's current trading price of US$61.18 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Encompass Health’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Encompass Health
Is Encompass Health still cheap?
Great news for investors – Encompass Health is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $79.23, but it is currently trading at US$61.18 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Encompass Health’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Encompass Health look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by a double-digit 16% over the next couple of years, the outlook is positive for Encompass Health. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since EHC is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on EHC for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy EHC. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.