The Overlooked Health Stock Hiding in Plain Sight

One investing theme I’ve written a lot about is the aging population. According to the World Health Organization, the world's population of people aged 60 years and older will double (2.1 billion) in the next 25 years. 

It’s a global phenomena, but America in particular is a hotspot, with those over age 65 already making up about the same percentage of the population as those under age 15: 

Source: Statista

So if you’re bullish on America getting older, this one’s for you.

Enhabit (NYSE: EHAB) is the only standalone, publicly traded US home health and hospice company left. The rest? All got bought out — often at rich premiums. And EHAB may be next.

But the real setup here is even better than that. EHAB is an A-rated stock according to our Zen Ratings System.

Why EHAB? Why Now?

EHAB is A-rated in an A-rated industry

Healthcare stocks tied to aging demographics tend to be slow, steady growers. But home health and hospice are red-hot, thanks to the push to lower hospital costs and shift care into the home. EHAB is now the top stock in its A-rated industry, according to our system.

Spin-off Setup = Forced Selling

EHAB was spun off from Encompass Health (NYSE: EHC) two years ago. Like many spin-offs, it was dumped by index funds and large institutional holders who didn’t want small-cap healthcare. That’s created a valuation gap… and an opportunity. This kind of forced selling is why spin-offs were a favorite hunting ground for legendary investors like Peter Lynch.

Every Peer Has Been Acquired

 This is the key:

• UnitedHealth (NYSE: UNH) bought LHC Group at 21x EBITDA.
• UNH is also buying Amedisys (NASDAQ: AMED) at 14.1x EBITDA (if the FTC ever approves it).
• EHAB trades at just 6.5x trailing EBITDA today.

Private equity giants like Advent and Bain Capital have already circled in the past. If someone swoops in at 13x, the stock could be worth $16.50+.

One reason EHAB hasn’t been bought yet? Lina Khan’s FTC.

Her office aggressively blocked healthcare M&A — including the Amedisys acquisition, which has been in limbo for over a year. Now, with Andrew Ferguson officially appointed as the new FTC Chair, that posture could be shifting. Ferguson is widely seen as pro-business, pro-dealflow, and anti-red tape.

There’s More to Like

Not only does EHAB score an A or “Strong Buy” overall, but it also scores an A in our Safety Component Grade. 

That means it scores well for: 

• Stock Price Stability: Measures the volatility of a company's stock price over time, reflecting how consistently it performs in the market compared to peers. Low volatility suggests greater resilience to market fluctuations.
• Receivables Standard Deviation: Evaluates the consistency of cash collections, ensuring that the company maintains stable and predictable revenue inflows.
• Earnings Estimate Standard Deviation: Assesses fluctuations in analyst predictions, providing insight into the predictability of a company's future earnings.

Here’s how we think about safety and stability stocks in a portfolio overall.

To see how EHAB scores on Growth, Momentum, and more, click here.

Bottom Line

EHAB is a rare mix of growth, timing, and narrative.

It’s a spin-off with built-in forced selling. It’s in a growing industry with obvious demographic tailwinds. It’s the last public name in a sector where its peers have been bought out. And it’s one policy change away from being a prime M&A target again.

To see our other top-rated medical care stocks, click here.

What to Do Next?

• 9 Special Stock Lists You Need Now >
• See All “A” Rated Stocks with +32.52% Average Annual Return >
• 2 New Stocks to Buy from Steve Reitmeister >

Want to get in touch? Email us at news@wallstreetzen.com.