Encompass Health is Monday's pick for IBD 50 Growth Stocks To Watch as the leading inpatient rehabilitation hospital operator is showing relative strength in a struggling stock market environment. The physical therapy stock is tightening up in a cup-with-handle base as it waits for its next catalyst.
The health services stock retreated around 0.4% Monday morning, but held up better than the major indexes on a day of hefty stock market losses.
Encompass Health operates 166 inpatient rehabilitation hospitals in the U.S. that offer speech, occupational and physical therapy and nursing services. Its rehab services treat patients with conditions ranging from amputation to burns to cancer.
The IBD 50 stock ranks No. 1 out of 18 stocks in the Medical-Outpatient/Home Care group. The group dropped to No. 152 from No. 111 four weeks ago, out of the 197 industry groups that Investor's Business Daily tracks.
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Physical Therapy Stock Holds Up In Base
Encompass Health stock is about 5% below a 103.83 buy point out of a cup-with-handle base, according to MarketSurge pattern recognition.
Its relative strength line hit a 52-week high as seen by the blue dot on its weekly chart. Shares have climbed nearly 7% so far this year, outperforming the S&P 500's 1.9% decline.
The physical therapy stock has wavered around its 21-day exponential moving average and is above its 50-day moving average.
Its 1.2 up/down volume ratio indicates positive demand for Encompass Health stock over the last 50 days.
Mutual funds have added shares of the physical therapy stock for eight straight quarters, according to IBD Leaderboard analysis.
Encompass Health Shows Steady Sales Growth
Encompass Health topped fourth-quarter earnings and sales estimates on Feb. 6. It gave a full-year 2025 earnings outlook in a range of $4.67 to $4.96 a share, with the midpoint above analyst estimates. Management also predicted full-year 2025 net revenue of $5.8 billion to $5.9 billion in the earnings report.
"In 2024, we increased our capacity by a total of 427 beds through new hospitals and bed additions to existing hospitals. Our value proposition and operating strategy continue to be validated and we remain bullish on the long-term prospects of our business," Encompass Chief Executive Mark Tarr said in the fourth-quarter earnings release.
Its quarterly profit growth accelerated to 23% from 17% and 20% in the prior two quarters. Sales growth also improved to 13% from 10% and 12% over the same time period.
Earnings Growth Slows
First-quarter earnings estimates show a more modest 7% increase, followed by a range of 6% to 11% growth over the next three quarters. Meanwhile sales are forecast to climb an average 9% over the next four quarters.
The rehab services provider has shown improvement in earnings over the last two years. In 2023, per-share profits grew 28% after declining 3% in 2022, then rose 22% in 2024. And earnings projections were recently boosted to 9% growth for 2025 and 11% for 2026.
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