Barry Port, chairman and chief executive of The Ensign Group Inc., said the source of the company’s growth is a “fanatical sort of consistency.”
In the past decade, the San Juan Capistrano-based operator of post-acute care services, including assisted living, skilled nursing and rehabilitative care facilities, has seen a compounded annual growth rate of 15% in revenue and an even higher 16% annual growth in adjusted earnings, according to Port.
“It’s been a pretty consistent ramp of performance for 18 years,” Port told the Business Journal in an exclusive interview.
The Ensign Group is in a growing industry—the American population over age 65 is expected to grow from 15% in 2016 to 21% in 2030. Since Ensign’s founding in 1999, it has expanded to 361 facilities with more than 35,500 operational skilled nursing beds and 3,300 senior living units.
The company’s known for acquiring underperforming facilities and improving them to become the “operation of choice” in the communities where they have facilities.
Wall Street has rewarded the company.
Since the stock hit a low of about $37 during the panic over how the pandemic was affecting the senior home industry, it’s been on an upward trajectory, increasing almost fivefold to an all-time high last week of $174.98.
Currently valued at $10 billion, Ensign is ranked as the fifth largest public company in Orange County, according to the Business Journal’s annual list of the largest publicly traded companies.
Ensign in 2014 also spun off a real estate subsidiary that has done quite well—San Clemente-based CareTrust REIT Inc., which sports a $7.8 billion market cap and has also grown to become one of the nation’s largest operators of senior facilities, overseeing 42,670 beds across 34 states.
Conservative Acquisition Strategy
Ensign’s latest earnings reported second-quarter revenue increased 19% to $1.23 billion.
Much of that growth was organic, the company noted, with 82.1% occupancy of facilities owned and operated by Ensign for a consistent period.
Ensign raised its guidance, now forecasting 2025 earnings of $6.34 to $6.46 a share, on sales of $4.99 billion to $5.02 billion, implying a 16% annual growth rate; analysts were expecting $5.90 a share on sales of $4.92 billion. In the 10 weeks since that July 24 forecast, shares have risen 26%.
The raised guidance also accounted for acquisitions that the company said are set to close in the third quarter.
Shortly following second-quarter earnings, Ensign announced a series of acquisitions of acute care facilities in California, Wisconsin and Iowa.
The company acquired five skilled nursing operations and three assisted living facilities in California, as well as three additional facilities pending regulatory reviews, adding over 1,200 operational beds and units.
Additionally, it acquired a 120-bed skilled nursing facility in Merrill, Wisconsin, as well as a 72-bed skilled nursing facility in Oskaloosa, Iowa.
These acquisitions bring Ensign’s portfolio to 361 operations, including 47 senior living operations, across 17 states.
Analyst firm Stephens reaffirmed its overweight rating and issued a price target of $170 for Ensign following the acquisition announcements.
“The M&A cadence continues at full steam, signifying more comfort with integrating larger asset bases while maintaining the fundamental tuck-in strategy,” Stephens analyst Raj Kumar wrote in an Aug. 4 note to investors.
A high percentage of other skilled nursing facility operators lease from third parties, according to Port. He said that Ensign, on the other hand, owns much of their real estate with one of its subsidiaries, Standard Bearer, owning nearly 150 properties.
“That’s a big part of our strategy too,” Port said.
He described Ensign as having a conservative approach to acquisitions.
“Our goal isn’t necessarily to be in all 50 states,” Port said. “We represent almost two and a half percent of the entire industry, so there’s still a huge amount of opportunity.”
The company is eyeing further expansion into stakes likeAlabama, Alaska and Oregon, where it’s already active.
The company’s preference is to grow in states it performs well in or is familiar with, such as California, because it works well with its cluster operating model, Port said.
The model facilitates collaboration between independently run facilities that are geographically close by making compensation linked to a cluster’s combined financial success.
“Density is actually helpful as our clusters work together, with health plans and hospitals to provide a diversity of services, almost like a network to meet the needs of the local healthcare community,” Port said.
Founder’s Legacy
“It’s very much a team effort carrying on a legacy from our founders who were really geniuses in putting the structure together of a field-driven organization of facilities,” Port said.
Ensign was co-founded by Roy Christensen and his son Christopher in 1999 with a goal of establishing “a new level of quality care” within nursing homes.
Roy, who died in 2021, had about 50 years in the long-term care industry, dating back to when he was also a member of President Richard Nixon’s Healthcare Advisory Task Force on Medicare and Medicaid.
Port has been with Ensign for 22 years in a variety of roles.
He was Ensign’s chief operating officer for five years before taking the CEO reins in 2019 from Christopher, who recently retired as executive chairman. Before retiring, he was the largest individual shareholder with about 2.4% of the shares worth an estimated $155 million.
In the beginning, Port started out as an administrator and operated a facility himself.
Port initially wanted to be a physician, changed his mind, then went back to graduate school to study hospital administration before realizing that wasn’t the direction he wanted to go in either.
“I backed my way into being an administrator after I saw a close friend of mine that was in the business and was loving what he was doing,” Port said.
Being in the skilled nursing home operating industry, however, is not for the faint of heart, he said.
Besides facing scrutiny over state and federal government funding and billing, the industry is vulnerable to politics and changing policies, Port said.
Some analysts believe the industry has turned a corner in Washington DC.
Analyst firm UBS issued a buy rating and $205 price target for Ensign, citing more favorable views from policymakers on the nursing home space.
“We left our meetings with ENSG feeling that the company has considerable operating momentum and should benefit from an improving industry backdrop over the next few years,” UBS analysts AJ Rice, James Kurek and Joseph Overman wrote in a Sept. 2 note to investors.
