Contrasting Encompass Health (NYSE:EHC) and U.S. Physical Therapy (NYSE:USPH)

Encompass Health (NYSE:EHC) and U.S. Physical Therapy (NYSE:USPH) are both medical companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, dividends, institutional ownership, risk, earnings, profitability and analyst recommendations.

Analyst Recommendations

This is a breakdown of current recommendations for Encompass Health and U.S. Physical Therapy, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Encompass Health	0	1	8	2	3.09
U.S. Physical Therapy	0	3	4	0	2.57

Encompass Health currently has a consensus price target of $142.86, suggesting a potential upside of 33.00%. U.S. Physical Therapy has a consensus price target of $105.33, suggesting a potential upside of 32.56%. Given Encompass Health’s stronger consensus rating and higher probable upside, analysts plainly believe Encompass Health is more favorable than U.S. Physical Therapy.

Dividends

Encompass Health pays an annual dividend of $0.76 per share and has a dividend yield of 0.7%. U.S. Physical Therapy pays an annual dividend of $1.80 per share and has a dividend yield of 2.3%. Encompass Health pays out 14.4% of its earnings in the form of a dividend. U.S. Physical Therapy pays out 75.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Encompass Health has increased its dividend for 2 consecutive years and U.S. Physical Therapy has increased its dividend for 6 consecutive years. U.S. Physical Therapy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Encompass Health and U.S. Physical Therapy’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Encompass Health	9.33%	17.84%	7.87%
U.S. Physical Therapy	5.71%	8.62%	3.64%

Valuation and Earnings

This table compares Encompass Health and U.S. Physical Therapy”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Encompass Health	$5.37 billion	2.01	$455.70 million	$5.29	20.31
U.S. Physical Therapy	$671.34 million	1.80	$31.42 million	$2.38	33.39

Encompass Health has higher revenue and earnings than U.S. Physical Therapy. Encompass Health is trading at a lower price-to-earnings ratio than U.S. Physical Therapy, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

97.3% of Encompass Health shares are held by institutional investors. 2.0% of Encompass Health shares are held by insiders. Comparatively, 2.0% of U.S. Physical Therapy shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Risk and Volatility

Encompass Health has a beta of 0.73, indicating that its share price is 27% less volatile than the S&P 500. Comparatively, U.S. Physical Therapy has a beta of 1.32, indicating that its share price is 32% more volatile than the S&P 500.

Summary

Encompass Health beats U.S. Physical Therapy on 13 of the 17 factors compared between the two stocks.

About Encompass Health

Encompass Health Corporation provides post-acute healthcare services in the United States and Puerto Rico. It owns and operates inpatient rehabilitation hospitals that provide medical, nursing, therapy, and ancillary services. The company provides specialized rehabilitative treatment on an inpatient basis to patients who have experienced physical or cognitive disabilities or injuries due to medical conditions, such as strokes, hip fractures, and various debilitating neurological conditions. It offers services through the Medicare program to federal government, managed care plans and private insurers, state governments, and other patients. The company was formerly known as HealthSouth Corporation and changed its name to Encompass Health Corporation in January 2018. The company was incorporated in 1984 and is based in Birmingham, Alabama.

About U.S. Physical Therapy

U.S. Physical Therapy, Inc. operates outpatient physical therapy clinics. The company operates through Physical Therapy Operations and Industrial Injury Prevention Services segments. The company provides pre-and post-operative care and treatment for orthopedic-related disorders, sports-related injuries, preventative care, rehabilitation of injured workers, and neurological-related injuries. It offers industrial injury prevention services, including onsite injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations, and ergonomic assessments through physical therapists and specialized certified athletic trainers for Fortune 500 companies, and other clients comprising insurers and their contractors. U.S. Physical Therapy, Inc. was founded in 1990 and is based in Houston, Texas.