Why The Ensign Group Inc. Got Crushered Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of The Ensign Group (NASDAQ: ENSG  ) , a provider of skilled nursing and rehabilitative service in states west of the Rocky Mountains, look as if they've ejected their warp core and were placed on red alert with shares down as much as 45% at one point. The good news for shareholders is that all is not what it appears and their money has safely been transported to a spun-off holding in a not-so-distant quadrant.

So what: According to The Ensign Group's early morning press release, its spin-off of CareTrust REIT (NASDAQ: CTRE  ) was successfully completed this morning, with Ensign shareholders receiving one share of CareTrust REIT for each share of Ensign that they owned. CareTrust is now free to focus its efforts on being a pure-play health-care real estate business while The Ensign Group can now focus its efforts on expanding its skilled nursing network – which it in fact did this morning with the purchase of four new facilities.

Now what: You might say Ensign Group has just entered the neutral zone. You'd think Q was playing tricks on investors with just a forward P/E of nine, but a challenging array of declining Medicare reimbursements at the heart of the Obamacare rollout are going to make Ensign's growth challenging unless it's able to rein in its spending and grow by acquisition as it announced this morning. Ensign's ability to engage its impulse engines will also depend on the data set of its patients. If the number of privately insured patients rises due to the implementation of Obamacare, it could actually be more beneficial for Ensign over the long run. For now I'd suggest the best course of action is to wait for a reasonable pullback before going to warp nine on Ensign.

This top stock could boldly send your portfolio to where no Wall Street analyst has gone before
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.


Read/Post Comments (1) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 03, 2014, at 3:35 PM, novatocarlos wrote:

    I have posited the possibility that Ensign could benefit from the federal government's VA debacle. To clear the clogged patient pipeline and alleviate PR problems, the VA could job out this business to companies like Ensign, which has a short-term, acute care model of skilled nursing. Thoughts?

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2980978, ~/Articles/ArticleHandler.aspx, 10/22/2014 7:26:33 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement