Analyzing Chemed (NYSE:CHE) and Encompass Health (NYSE:EHC)

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

Institutional & Insider Ownership

95.9% of Chemed shares are owned by institutional investors. Comparatively, 97.3% of Encompass Health shares are owned by institutional investors. 3.3% of Chemed shares are owned by company insiders. Comparatively, 2.1% of Encompass Health shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Chemed and Encompass Health, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Chemed	0	1	4	0	2.80
Encompass Health	0	0	8	1	3.11

Chemed currently has a consensus target price of $578.50, suggesting a potential upside of 32.97%. Encompass Health has a consensus target price of $139.86, suggesting a potential upside of 13.14%. Given Chemed’s higher possible upside, equities analysts plainly believe Chemed is more favorable than Encompass Health.

Dividends

Chemed pays an annual dividend of $2.40 per share and has a dividend yield of 0.6%. Encompass Health pays an annual dividend of $0.76 per share and has a dividend yield of 0.6%. Chemed pays out 12.3% of its earnings in the form of a dividend. Encompass Health pays out 14.9% 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. Chemed has raised its dividend for 16 consecutive years and Encompass Health has raised its dividend for 2 consecutive years.

Earnings & Valuation

This table compares Chemed and Encompass Health”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Chemed	$2.43 billion	2.61	$302.00 million	$19.45	22.37
Encompass Health	$5.37 billion	2.32	$455.70 million	$5.11	24.19

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

Volatility & Risk

Chemed has a beta of 0.43, suggesting that its stock price is 57% less volatile than the S&P 500. Comparatively, Encompass Health has a beta of 0.93, suggesting that its stock price is 7% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Chemed	11.56%	25.83%	17.77%
Encompass Health	9.22%	17.83%	7.68%

About Chemed

Chemed Corporation provides hospice and palliative care services to patients through a network of physicians, registered nurses, home health aides, social workers, clergy, and volunteers primarily in the United States. The company operates in VITAS and Roto-Rooter segments. It offers plumbing, drain cleaning, excavation, water restoration, and other related services to residential and commercial customers through company-owned branches, independent contractors, and franchisees. The company was incorporated in 1970 and is headquartered in Cincinnati, Ohio.

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.