CVS Health (NYSE:CVS) and Encompass Health (NYSE:EHC) Financial Comparison

Encompass Health (NYSE:EHC) and CVS Health (NYSE:CVS) are both large-cap healthcare companies, but which is the superior stock? We will compare the two businesses based on the strength of their dividends, valuation, profitability, earnings, institutional ownership, analyst recommendations and risk.

Volatility & Risk

Encompass Health has a beta of 0.74, indicating that its share price is 26% less volatile than the S&P 500. Comparatively, CVS Health has a beta of 0.6, indicating that its share price is 40% less volatile than the S&P 500.

Profitability

This table compares Encompass Health and CVS Health’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Encompass Health	10.01%	18.08%	8.22%
CVS Health	1.18%	13.12%	3.95%

Dividends

Encompass Health pays an annual dividend of $0.84 per share and has a dividend yield of 0.7%. CVS Health pays an annual dividend of $2.66 per share and has a dividend yield of 3.0%. Encompass Health pays out 13.7% of its earnings in the form of a dividend. CVS Health pays out 70.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Encompass Health has raised its dividend for 2 consecutive years and CVS Health has raised its dividend for 4 consecutive years. CVS Health is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Encompass Health and CVS Health”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	$5.94 billion	2.04	$566.20 million	$6.14	19.96
CVS Health	$402.07 billion	0.28	$1.77 billion	$3.78	23.24

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

Insider & Institutional Ownership

97.3% of Encompass Health shares are owned by institutional investors. Comparatively, 80.7% of CVS Health shares are owned by institutional investors. 1.8% of Encompass Health shares are owned by company insiders. Comparatively, 0.9% of CVS Health shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Encompass Health and CVS Health, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Encompass Health	0	1	5	1	3.00
CVS Health	0	1	22	0	2.96

Encompass Health currently has a consensus target price of $148.50, indicating a potential upside of 21.18%. CVS Health has a consensus target price of $107.24, indicating a potential upside of 22.07%. Given CVS Health’s higher possible upside, analysts clearly believe CVS Health is more favorable than Encompass Health.

Summary

Encompass Health beats CVS Health on 11 of the 18 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 CVS Health

CVS Health Corporation provides health solutions in the United States. It operates through Health Care Benefits, Health Services, and Pharmacy & Consumer Wellness segments. The Health Care Benefits segment offers traditional, voluntary, and consumer-directed health insurance products and related services. It serves employer groups, individuals, college students, part-time and hourly workers, health plans, health care providers, governmental units, government-sponsored plans, labor groups, and expatriates. The Health Services segment offers pharmacy benefit management solutions, including plan design and administration, formulary management, retail pharmacy network management, specialty and mail order pharmacy, clinical, disease management, and medical spend management services. It serves employers, insurance companies, unions, government employee groups, health plans, prescription drug plans, Medicaid managed care plans, CMS, plans offered on public health insurance, and other sponsors of health benefit plans. The Pharmacy & Consumer Wellness segment sells prescription and over-the-counter drugs, consumer health and beauty products, and personal care products. This segment also distributes prescription drugs; and provides related pharmacy consulting and other ancillary services to care facilities and other care settings. It operates online retail pharmacy websites, LTC pharmacies and on-site pharmacies, retail specialty pharmacy stores, compounding pharmacies and branches for infusion and enteral nutrition services. The company was formerly known as CVS Caremark Corporation and changed its name to CVS Health Corporation in September 2014. CVS Health Corporation was incorporated in 1996 and is headquartered in Woonsocket, Rhode Island.