Healthcare services company The Ensign Group (NASDAQ: ENSG). fell short of the market’s revenue expectations in Q4 CY2025, but sales rose 20.2% year on year to $1.36 billion. On the other hand, the company’s full-year revenue guidance of $5.81 billion at the midpoint came in 1.7% above analysts’ estimates. Its GAAP profit of $1.61 per share was 3.4% below analysts’ consensus estimates.

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“We are excited to report another record year and record quarter in several key areas. It’s difficult to convey in words how so many individuals work so hard and achieve such amazing outcomes through so many small moments of selfless service. None of the results are possible without the outstanding work being done by these amazing nurses, therapists, dieticians, food service professionals, activities coordinators and the many others whose unwavering commitment shapes the daily care experience for thousands of patients across our portfolio,” said Barry Port, Ensign’s Chief Executive Officer.

Company Overview

Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ: ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Thankfully, The Ensign Group’s 16.8% annualized revenue growth over the last five years was impressive. Its growth beat the average healthcare company and shows its offerings resonate with customers, a helpful starting point for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. The Ensign Group’s annualized revenue growth of 18.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can better understand the company’s revenue dynamics by analyzing its number of units sold, which reached 2.87 million in the latest quarter. Over the last two years, The Ensign Group’s units sold averaged 12.1% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, The Ensign Group generated an excellent 20.2% year-on-year revenue growth rate, but its $1.36 billion of revenue fell short of Wall Street’s high expectations.

Looking ahead, sell-side analysts expect revenue to grow 19.9% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and indicates its newer products and services will fuel better top-line performance.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

The Ensign Group was profitable over the last five years but held back by its large cost base. Its average operating margin of 8.5% was weak for a healthcare business.

Analyzing the trend in its profitability, The Ensign Group’s operating margin decreased by 1.7 percentage points over the last five years, but it rose by 1.3 percentage points on a two-year basis. We like The Ensign Group and hope it can right the ship.

This quarter, The Ensign Group generated an operating margin profit margin of 9.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

The Ensign Group’s EPS grew at a spectacular 13.9% compounded annual growth rate over the last five years. However, this performance was lower than its 16.8% annualized revenue growth, telling us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into The Ensign Group’s earnings to better understand the drivers of its performance. As we mentioned earlier, The Ensign Group’s operating margin was flat this quarter but declined by 1.7 percentage points over the last five years. Its share count also grew by 5.3%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q4, The Ensign Group reported EPS of $1.61, up from $1.36 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects The Ensign Group’s full-year EPS of $5.84 to grow 17.5%.

Key Takeaways from The Ensign Group’s Q4 Results

We were impressed by how significantly The Ensign Group blew past analysts’ full-year EPS guidance expectations this quarter. We were also glad its full-year revenue guidance exceeded Wall Street’s estimates. On the other hand, its revenue missed and its EPS fell short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The stock remained flat at $173.19 immediately after reporting.

Is The Ensign Group an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).