We recently compiled a list of the 10 Best Mid-Cap Healthcare Stocks To Buy Now. In this article, we are going to take a look at where Encompass Health Corporation (NYSE:EHC) stands against the other mid-cap healthcare stocks.
Global Healthcare Market: Growth Projections, Challenges, and Tech-Driven Innovations
According to projections by ReportLinker, the market for healthcare services will increase from $7.5 trillion in 2022 to $7.975 trillion in 2023. Through 2027, it is projected to grow at a compound annual growth rate (CAGR) of 6.3%, or $9.8 trillion. Hospitals, digital health, and healthcare services are some of the segments that make up the global healthcare market. Between 2024 and 2029, the hospital market alone is expected to increase by 4.18% annually, reaching a market value of $5.19 trillion.
In December 2023, the World Health Organization reported that global healthcare spending hit a record $9.8 trillion in 2021, or 10.3% of global GDP. However, spending was unevenly distributed, with low-income countries experiencing a decline in government health spending, relying more on external aid. While 11% of the global population lived in countries spending less than $50 per person on health, high-income countries spent around $4,000 per capita. Despite rising public health spending during COVID-19, this growth is unlikely to continue as countries face economic challenges like slow growth, high inflation, and increased debt.
Dr Bruce Aylward, WHO Assistant Director-General, Universal Health Coverage, Life Course, said:
“Sustained public financing on health is urgently needed to progress towards universal health coverage. It is especially critical at this time when the world is confronted by the climate crisis, conflicts, and other complex emergencies. People’s health and well-being need to be protected by resilient health systems that can also withstand these shocks.”
The Centers for Medicare and Medicaid Services (CMS) estimates that national healthcare expenditures would grow at an average rate of 5.6% between 2027 and 2032, with spending on healthcare expected to reach an estimated $4.8 trillion in 2023.
The healthcare market is undergoing a tech-driven, patient-centered revolution. Telehealth, boosted by the pandemic, is now mainstream, with the global market valued at $60.15 billion in 2023 and expected to grow steadily. Precision medicine, driven by genomics, is set to become a $50.2 billion market by 2028, offering personalized treatments based on genetic makeup. AI is also transforming healthcare, with $31.5 billion in equity funding from 2019 to 2022 and potential annual US savings of $360 billion within five years. Remote patient monitoring (RPM) is rising, with the global market at $71.9 billion in 2023 and projected to grow, supported by wearable technology.
Our Methodology
In our methodology, we focused on selecting healthcare stocks with market capitalizations between $2 billion and $10 billion that also had a strong/moderate buy rating and high institutional ownership. After identifying these stocks, we ranked them in ascending order based on their number of hedge fund holders as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A home health aide helping an elderly person with their daily activities.
Encompass Health Corporation (NYSE:EHC)
Hedge Fund Holders: 39
Encompass Health Corporation (NYSE:EHC) is a leading U.S. provider of post-acute healthcare services, operating in two main segments: Inpatient Rehabilitation and Home Health & Hospice. The company offers specialized care for patients recovering from conditions like stroke, neurological disorders, and complex orthopedic issues.
The company experienced a 13.4% increase in revenue during the first quarter of 2024, primarily driven by a 10% rise in total patient discharges. Encompass Health Corporation (NYSE:EHC)’s President and Chief Executive Officer said in the Q2 earnings call transcript:
“We are continuing the expansion of our joint venture partnership with Piedmont the leading health care system in the state of Georgia. In May, we opened a 40-bed IRF unit within Piedmont Atlanta Hospital. In July, we expanded the relationship further with our existing 70-bed hospital in Augusta Georgia. Our joint venture relationship with Piedmont now includes six open hospitals and the previously announced plans to build hospitals in Athens, and Logan Ville, Georgia. With 15 development projects beyond 2024, already announced and underway, our pipeline remains robust and balanced between wholly owned and joint ventures. We also recently decided to undertake a major ERP conversion from predominantly an Oracle People Soft platform to Oracle Fusion.”
As of Q2 2024, around 39 hedge fund holders held stakes in the stock with Citadel Investment Group being the largest stakeholder with 1,536,417 shares worth $131,809,215. The stock holds a Strong Buy rating based on 7 Wall Street analysts. The average price target is $101.43, with a high of $109.00 and a low of $95.00, indicating a 9.01% increase from the current price of $93.05.
Overall EHC ranks 9th on our list of the best mid-cap stocks to buy. While we acknowledge the potential of EHC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EHC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
