Financial Analysis: Encompass Health (EHC) vs. Magellan Health (MGLN)

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

Earnings & Valuation

This table compares Encompass Health and Magellan Health’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Encompass Health $3.97 billion 1.57 $256.30 million $2.76 22.87
Magellan Health $5.84 billion 0.38 $110.20 million $5.50 16.56

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

Analyst Recommendations

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Encompass Health 0 2 6 0 2.75
Magellan Health 0 0 4 0 3.00

Encompass Health presently has a consensus price target of $67.33, suggesting a potential upside of 6.66%. Magellan Health has a consensus price target of $90.67, suggesting a potential downside of 0.48%. Given Encompass Health’s higher probable upside, equities research analysts plainly believe Encompass Health is more favorable than Magellan Health.

Dividends

Encompass Health pays an annual dividend of $1.00 per share and has a dividend yield of 1.6%. Magellan Health does not pay a dividend. Encompass Health pays out 36.2% of its earnings in the form of a dividend.

Volatility & Risk

Encompass Health has a beta of 0.37, suggesting that its share price is 63% less volatile than the S&P 500. Comparatively, Magellan Health has a beta of 0.52, suggesting that its share price is 48% less volatile than the S&P 500.

Institutional & Insider Ownership

92.4% of Encompass Health shares are owned by institutional investors. Comparatively, 95.2% of Magellan Health shares are owned by institutional investors. 1.6% of Encompass Health shares are owned by company insiders. Comparatively, 4.6% of Magellan Health shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Encompass Health 6.76% 20.76% 5.90%
Magellan Health 1.64% 10.72% 4.73%

Summary

Encompass Health beats Magellan Health on 9 of the 16 factors compared between the two stocks.

About Encompass Health

Encompass Health Corporation provides facility-based and home-based post-acute healthcare services in the United States. The company operates through two segments, Inpatient Rehabilitation, and Home Health and Hospice. The Inpatient Rehabilitation segment provides specialized rehabilitative treatment on an inpatient and outpatient basis to patients who are recovering from conditions, such as stroke and other neurological disorders, cardiac and pulmonary conditions, brain and spinal cord injuries, complex orthopedic conditions, and amputations. The Home Health and Hospice segment provides home health and hospice services primarily in the Southeast and Texas. Its home health services include a range of Medicare-certified home nursing services to adult patients in need of care comprising skilled nursing, medical social work, and home health aide services, as well as physical, occupational, speech therapy, and others. This segment's hospice services comprise in-home services to terminally ill patients and their families to address patients' physical needs, including pain control and symptom management, and to provide emotional and spiritual support. As of March 1, 2018, Encompass Health Corporation operated 127 hospitals, and 237 home health and hospice agencies in 36 states and Puerto Rico. The company was formerly known as HealthSouth Corporation and changed its name to Encompass Health Corporation in January 2018. Encompass Health Corporation was founded in 1983 and is based in Birmingham, Alabama.

About Magellan Health

Magellan Health, Inc. provides healthcare management services in the United States. It operates in Healthcare and Pharmacy Management segments. The Healthcare segment offers carve-out management services for behavioral health; employee assistance plans (EAP); and other areas of specialty healthcare, including diagnostic imaging, musculoskeletal management, cardiac, and physical medicine for health plans, care organizations, and employers. It also contracts with local, state, and federal governmental agencies to provide services to recipients under Medicaid, Medicare, and other government programs, such as behavioral health and EAP, as well as healthcare management and long term support services through its network of medical and behavioral health professionals, clinics, hospitals, nursing facilities, home care agencies, and ancillary service providers. The Pharmacy Management segment comprises products and solutions that provide clinical and financial management of pharmaceuticals paid under medical and pharmacy benefit programs. This segment offers pharmacy benefit management services, pharmacy benefit administration for state Medicaid and other government sponsored programs, pharmaceutical dispensing services, clinical and formulary management programs, medical pharmacy management programs, and programs for the integrated management of specialty drugs that treat complex conditions. The company provides services to health plans and other managed care organizations, employers, labor unions, various military and governmental agencies, and third party administrators. Magellan Health, Inc. was founded in 1969 and is headquartered in Scottsdale, Arizona.

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