What Happened?
Shares of health care services provider Encompass Health (NYSE: EHC) fell 3.1% in the afternoon session after investors reacted to weak near-term sentiment and concerns over the company's long-term financial health. The stock's performance had already been disappointing, posting a 6.5% loss over the previous six months, significantly lagging the S&P 500's gain. A deeper look into its financials revealed a slow sales growth of just 4.7% compounded annually over the last five years. Furthermore, the company's free cash flow margin had dropped by 1.3 percentage points during the same period. This backdrop of underwhelming financial metrics was compounded by analysis suggesting elevated downside risk for the shares.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Encompass Health? Access our full analysis report here.
What Is The Market Telling Us
Encompass Health’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock dropped 6% on the news that President Trump criticized the Federal Reserve's approach to interest rate cuts, warning that the pace was slow and could hinder economic growth.
Trump's comments added pressure to an already sensitive market, raising concerns about political interference in monetary policy. Meanwhile, Fed Chair Jerome Powell maintained a cautious stance the previous week, highlighting the difficulty of balancing the dual mandate of steady employment and price stability amid the escalating trade tension. Investor sentiment was further dampened by the absence of constructive progress in trade negotiations, especially US-China relations which took a turn for the worse in the previous week. Overall, the outlook seemed more unclear heading into the first quarter 2025 earnings season, as a combination of hard to predict monetary policy and unresolved trade tensions weighed on business confidence.
Encompass Health is up 18% since the beginning of the year, but at $108.39 per share, it is still trading 14.8% below its 52-week high of $127.18 from October 2025. Investors who bought $1,000 worth of Encompass Health’s shares 5 years ago would now be looking at an investment worth $1,261.
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