The Ensign Group, Inc. (ENSG) Bundle
Understanding The Ensign Group, Inc. (ENSG) Revenue Streams
Understanding The Ensign Group, Inc.’s Revenue Streams
The Ensign Group, Inc. generates revenue primarily through skilled services, rental income, and other ancillary services. Below is a detailed breakdown of these revenue sources.
Revenue Sources Breakdown
- Skilled Services Revenue: For the three months ended September 30, 2024, the skilled services revenue totaled $1,033,113,000, compared to $902,967,000 for the same period in 2023, marking a 14.4% increase.
- Rental Revenue: Rental revenue for the three months ended September 30, 2024, was $24,429,000, up from $20,980,000 in 2023, a 16.4% increase.
- Other Revenue: Other revenue was recorded at $51,144,000 for the three months ended September 30, 2024, compared to $39,124,000 in 2023, reflecting a 30.7% increase.
Year-over-Year Revenue Growth Rate
The total revenue for the three months ended September 30, 2024, was $1,081,776,000, up from $940,791,000 in the same period of 2023, resulting in a 15.0% year-over-year growth.
Contribution of Different Business Segments to Overall Revenue
| Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Change ($ thousands) | Percentage Change |
|---|---|---|---|---|
| Skilled Services | $1,033,113 | $902,967 | $130,146 | 14.4% |
| Rental Revenue | $24,429 | $20,980 | $3,449 | 16.4% |
| Other Revenue | $51,144 | $39,124 | $12,020 | 30.7% |
| Total Revenue | $1,081,776 | $940,791 | $140,985 | 15.0% |
Analysis of Significant Changes in Revenue Streams
The increase in skilled services revenue was driven by strong occupancy rates, which improved to 80.9% in Q3 2024 from 78.9% in Q3 2023. Additionally, the revenue generated from Recently Acquired Facilities contributed significantly, increasing by $70.8 million during the same period.
Managed care revenue also saw a notable increase of 17.2%, while Medicare and private revenue increased by 15.7% and 10.0%, respectively. Furthermore, Medicaid revenue rose by 12.2%, indicating a diverse growth across payer types.
For the nine months ended September 30, 2024, total revenue reached $3,128,233,000, a rise from $2,748,977,000 in the previous year, which corresponds to a growth rate of 13.8%.
A Deep Dive into The Ensign Group, Inc. (ENSG) Profitability
A Deep Dive into The Ensign Group, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was calculated as follows:
| Period | Total Revenue (in thousands) | Total Expenses (in thousands) | Gross Profit (in thousands) | Gross Profit Margin (%) |
|---|---|---|---|---|
| Q3 2024 | $1,081,776 | $982,616 | $99,160 | 9.2% |
| Q3 2023 | $940,791 | $858,746 | $82,045 | 8.7% |
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was:
| Period | Total Revenue (in thousands) | Total Operating Expenses (in thousands) | Operating Profit (in thousands) | Operating Profit Margin (%) |
|---|---|---|---|---|
| 9M 2024 | $3,128,233 | $2,845,562 | $282,671 | 9.0% |
| 9M 2023 | $2,748,977 | $2,507,397 | $241,580 | 8.8% |
Net Profit Margin: For the three months ended September 30, 2024, the net profit margin was:
| Period | Net Income (in thousands) | Total Revenue (in thousands) | Net Profit Margin (%) |
|---|---|---|---|
| Q3 2024 | $78,444 | $1,081,776 | 7.3% |
| Q3 2023 | $63,863 | $940,791 | 6.8% |
Trends in Profitability Over Time
Comparing the profitability metrics between 2023 and 2024, we observe a positive trend:
- Gross profit margin increased from 8.7% in Q3 2023 to 9.2% in Q3 2024.
- Operating profit margin improved from 8.8% in 9M 2023 to 9.0% in 9M 2024.
- Net profit margin rose from 6.8% in Q3 2023 to 7.3% in Q3 2024.
Comparison of Profitability Ratios with Industry Averages
The industry average net profit margin for healthcare services is approximately 5.5%. The Ensign Group's net profit margin of 7.3% indicates a stronger profitability position compared to the industry average.
Analysis of Operational Efficiency
The cost of services for the nine months ended September 30, 2024, was:
| Metric | 9M 2024 | 9M 2023 | Change (%) |
|---|---|---|---|
| Cost of Services (in thousands) | $2,383,742 | $2,081,107 | 14.5% |
| Revenue Percentage | 79.6% | 78.9% | 0.7% |
Operational efficiency can be assessed through the gross margin trends:
- The gross margin has steadily improved, reflecting effective cost management strategies.
- General and administrative expenses increased by 8.4% to $169.5 million, but as a percentage of revenue, it decreased by 0.3% to 5.4%.
Overall, the Ensign Group's profitability metrics display a robust financial health trend, with consistent improvements across various profitability ratios and a competitive edge over industry averages.
Debt vs. Equity: How The Ensign Group, Inc. (ENSG) Finances Its Growth
Debt vs. Equity: How The Ensign Group, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the company's total debt is approximately $1.35 billion. This includes both long-term and short-term debt components. The breakdown is as follows:
| Type of Debt | Amount (in thousands) |
|---|---|
| Long-term Debt | $1,350,664 |
| Short-term Debt | $3,650 |
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 0.91, which is calculated by dividing total debt by total equity of $1.75 billion as of the same date. This ratio is below the industry average of 1.0, indicating a relatively conservative leverage position compared to peers.
Recent Debt Issuances and Refinancing Activity
In 2024, the company issued $400,000 in new debt. The interest rates associated with the existing Credit Facility range from 0.25% to 1.25% plus a base rate. Additionally, the company has approximately $2.9 billion in future operating lease obligations as of September 30, 2024.
Credit Ratings
The company maintains a credit rating of Baa2 from Moody's, reflecting a moderate credit risk, which allows access to favorable borrowing terms.
Balancing Debt Financing and Equity Funding
The Ensign Group has strategically balanced its financing through a combination of debt and equity. For the nine months ended September 30, 2024, cash paid for acquisitions totaled $87.2 million, supported by operational cash flow and existing cash reserves. The company also reported $246.7 million in net cash provided by operating activities during the same period, ensuring sufficient liquidity to cover debt obligations.
Furthermore, the company has a solid equity base, with total stockholders' equity reported at $1.75 billion as of September 30, 2024. This robust equity position allows for flexibility in financing future growth initiatives through both debt and equity channels.
Assessing The Ensign Group, Inc. (ENSG) Liquidity
Assessing The Ensign Group, Inc. Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio is 1.52, indicating a healthy liquidity position to cover short-term liabilities. The quick ratio stands at 1.01, suggesting sufficient liquid assets when excluding inventory from current assets.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, is approximately $532.1 million, reflecting a significant increase from $467.9 million reported in 2023. This upward trend supports operational flexibility and financial resilience.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, amounted to $246.7 million, a decrease from $291.4 million in the same period in 2023. Cash used in investing activities was ($223.5 million), up from ($137.8 million) in 2023, primarily due to increased capital expenditures.
Cash flows from financing activities show a small outflow of ($825,000) for 2024 compared to ($2.0 million) in 2023. The net increase in cash and cash equivalents for 2024 was $22.4 million, versus $151.6 million in 2023.
| Cash Flow Components (In thousands) | 2024 | 2023 |
|---|---|---|
| Cash from Operating Activities | $246,730 | $291,397 |
| Cash Used in Investing Activities | ($223,465) | ($137,754) |
| Cash from Financing Activities | ($825) | ($2,043) |
| Net Increase in Cash | $22,440 | $151,600 |
| Cash and Cash Equivalents at End of Period | $532,066 | $467,870 |
Potential Liquidity Concerns or Strengths
Despite a decrease in cash from operating activities, the company maintains a robust cash position with cash and cash equivalents totaling $532.1 million as of September 30, 2024. The liquidity position is further supported by approximately $154.5 million in investments. Additionally, the company has a revolving credit facility of up to $600 million to further enhance liquidity if required.
Is The Ensign Group, Inc. (ENSG) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze its valuation ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 35.6, calculated from a trailing twelve-month earnings per share (EPS) of $3.76 and a current stock price of $134.00.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.8, derived from a book value per share of $48.00.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 14.5, with an enterprise value of $2.05 billion and EBITDA of $141 million.
Stock Price Trends
Over the past 12 months, the stock price has shown the following trends:
- 12 months ago: $112.00
- 6 months ago: $130.00
- 3 months ago: $125.00
- Current price: $134.00
Dividend Yield and Payout Ratios
The company has a dividend yield of 0.045 (or 4.5%), with a dividend payout ratio of 22.5% based on an annual dividend of $0.30 per share.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a hold rating, with 40% recommending to buy, 50% recommending to hold, and 10% recommending to sell.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 35.6 |
| P/B Ratio | 2.8 |
| EV/EBITDA Ratio | 14.5 |
| Current Stock Price | $134.00 |
| 12-Month Stock Price Low | $112.00 |
| 12-Month Stock Price High | $140.00 |
| Dividend Yield | 4.5% |
| Dividend Payout Ratio | 22.5% |
| Analyst Consensus | Hold |
Key Risks Facing The Ensign Group, Inc. (ENSG)
Key Risks Facing The Ensign Group, Inc.
The financial health of the company is influenced by various internal and external risk factors, including industry competition, regulatory changes, and market conditions.
Industry Competition
The skilled nursing facility industry is highly competitive. As of September 30, 2024, the company operated 282 facilities, an increase of 9.3% from 258 facilities in 2023. This expansion can lead to increased competition for market share, impacting pricing and occupancy rates.
Regulatory Changes
Changes in healthcare regulations can significantly affect operations. The company has noted increased costs due to compliance with federal and state regulations, which can impact profitability. For instance, the cost of services related to skilled services increased by 14.5% year-over-year to $2.383 billion.
Market Conditions
Economic fluctuations and changes in healthcare funding can impact patient volumes. The company reported a consolidated occupancy percentage of 80.4% for the nine months ended September 30, 2024, up from 78.3% in the prior year. However, any downturn in the economy could lead to reduced patient admissions and revenues.
Operational Risks
Operational risks include challenges related to staffing and maintaining high-quality care. The company faces ongoing labor pressures, which have resulted in increased labor costs. Labor costs as a percentage of revenue rose to 79.6%. The company has implemented strategies to attract and retain healthcare professionals, but ongoing labor shortages remain a concern.
Financial Risks
Financial risks include fluctuations in interest rates and the company's debt levels. Interest expense for the nine months ended September 30, 2024, was $6.028 million, compared to $6.083 million in 2023. With significant investments in acquisitions and capital expenditures totaling $110.1 million for the nine months ended September 30, 2024, managing debt levels is critical.
Strategic Risks
The company's growth strategy relies heavily on acquisitions. The cash paid for acquisitions was $87.2 million in 2024, up from $54.0 million in 2023. While acquisitions can enhance growth, they also pose risks related to integration and operational alignment.
Mitigation Strategies
To mitigate these risks, the company has focused on diversifying its revenue streams, improving operational efficiencies, and enhancing its workforce capabilities. The company maintains a cash position that supports its operational needs, with cash flows from operations amounting to $246.7 million for the nine months ended September 30, 2024.
| Risk Category | Description | Current Impact |
|---|---|---|
| Industry Competition | Increased number of facilities | 282 facilities as of September 30, 2024 |
| Regulatory Changes | Compliance costs rising | Cost of services increased to $2.383 billion |
| Market Conditions | Economic fluctuations affecting admissions | Occupancy percentage at 80.4% |
| Operational Risks | Staffing challenges | Labor costs at 79.6% of revenue |
| Financial Risks | Interest rate fluctuations | Interest expense at $6.028 million |
| Strategic Risks | Reliance on acquisitions | Acquisition costs at $87.2 million |
Future Growth Prospects for The Ensign Group, Inc. (ENSG)
Future Growth Prospects for The Ensign Group, Inc. (ENSG)
Analysis of Key Growth Drivers
The Ensign Group has identified several key growth drivers that position it favorably in the healthcare sector:
- Product Innovations: The company continues to enhance its service offerings within skilled nursing and senior living facilities, contributing to increased occupancy and revenue.
- Market Expansions: As of September 30, 2024, the company operates 282 facilities, up from 258 in 2023, marking a 9.3% increase in facility count.
- Acquisitions: Recently, the company has acquired 28 facilities across eight states, significantly boosting its skilled services revenue by $70.8 million compared to the previous year.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections for The Ensign Group indicate a robust upward trend. For the nine months ended September 30, 2024, total revenue reached $3,128.2 million, an increase of 13.8% from $2,748.9 million in the same period of 2023. The skilled services segment alone generated $2,994 million in revenue, up from $2,638 million, reflecting a 13.5% year-over-year growth.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company continues to forge partnerships with managed care organizations and local hospitals, which has resulted in a 12.1% increase in managed care revenue. This strategic focus is expected to enhance patient care options and expand the company's market share.
Competitive Advantages That Position the Company for Growth
The Ensign Group's competitive advantages include:
- Strong Operational Model: Each facility operates with a market-specific strategy, allowing for tailored services that meet local healthcare needs.
- High Occupancy Rates: The company reported an 80.9% occupancy rate across operational beds as of September 30, 2024, up from 78.9% in 2023.
- Diverse Revenue Streams: The revenue from ancillary services and senior living operations has increased by 30.7% to $51.1 million compared to the previous year, indicating successful diversification.
Financial Metrics Overview
| Metric | 2024 | 2023 | Change | % Change |
|---|---|---|---|---|
| Total Revenue (in millions) | $3,128.2 | $2,748.9 | $379.3 | 13.8% |
| Skilled Services Revenue (in millions) | $2,994.0 | $2,638.1 | $355.9 | 13.5% |
| Occupancy Percentage | 80.9% | 78.9% | 2.0% | 2.5% |
| Managed Care Revenue Growth | 12.1% | - | - | - |
| Facilities Count | 282 | 258 | 24 | 9.3% |
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Article updated on 8 Nov 2024
Resources:
- The Ensign Group, Inc. (ENSG) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of The Ensign Group, Inc. (ENSG)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View The Ensign Group, Inc. (ENSG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.