Ensign Group Boosts Arizona Base With Real Estate Buyout

The Ensign Group, Inc. (NASDAQ:ENSG) has acquired the real estate and operations of Peoria Post Acute and Rehabilitation, a 128-bed skilled nursing facility located in Peoria, AZ. The buyout was effective Apr 1, 2018. An adjacent 50-bed long-term acute care hospital, operated by a third party under a lease arrangement, is also included in this facility.

Details of the Deal

Ensign Group operates in a large and highly fragmented skilled nursing industry, which generates significant acquisition and consolidation opportunities. The field is monopolized by numerous local and regional providers.

Following the acquisition, Ensign Group now owns the real estate’s 66 of 233 healthcare operations. With this purchase, the acquirer expands its portfolio to 182 skilled nursing operations consisting of 21 assisted living operations, 51 assisted and independent living operations, 22 hospice agencies, 20 home health agencies and four home care businesses across 15 states.

What Management Thinks

Management stated that it is actively seeking additional opportunities to own complete stakes in real estate activities or to lease both flourishing and struggling skilled nursing, assisted living and other healthcare-related businesses across the United States.

The company is also confident that aligning with its focus on becoming the top-class post-acute care provider in the market, this acquisition will facilitate it to deliver high-quality services in Arizona.

Inorganic Growth

Ensign Group is always inclined towards achieving growth via inorganic means. Much of the company’s historical growth can be attributed to its expertise in buying real estate or leasing both underperforming and proficiently executing post-acute care operations. Subsequently, the company applies its core operating know-how to improve upon each acquired service, both clinically and financially.

Earlier this year, Ensign Group’s assisted and independent living portfolio company, Bridgestone Living LLC, acquired the real estate and operations of two assisted living facilities in Texas. We thus expect the company to continue with its inorganic efforts going forward.

Consolidation in the Industry

The hospital industry is witnessing consolidation due to rising expenses, declining admissions, increasing bad debts and a flurry of regulatory actions. These are compelling the players to gain in scale for survival.

This month, MEDNAX, Inc. (NYSE:MD) closed the acquisition of Pediatric Urology Practice in South Florida.

Share Price Performance

Despite all the industry headwinds, the share price reflects shareholders’ confidence in the stock. The company’s inorganic growth endeavors have significantly aided its top-line growth. The stock has surged 45.6% in a year’s time, substantially outperforming the industry’s decline of 21.5%.

Zacks Rank & Other Stocks to Consider

The Ensign Group carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors can also look check out a couple of other top-ranked stocks from the Medical sector like Align Technology, Inc. (NASDAQ:ALGN) and Universal Health Services, Inc. (NYSE:UHS) . Both stocks carry a Zacks Rank of 2.

Align Technology pulled off positive surprises in each of the last four quarters with an average beat of 22.6%.

Universal Health’s earnings surpassed expectations in two of the last four quarters with an average beat of 0.2%.

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