The Ensign Group (NASDAQ: ENSG) and AAC Holdings (NYSE:AAC) are both small-cap medical companies, but which is the better stock? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, risk, dividends, profitabiliy and analyst recommendations.

Profitability

This table compares The Ensign Group and AAC Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The Ensign Group 2.55% 13.51% 6.54%
AAC Holdings -0.62% 9.40% 3.84%

Volatility and Risk

The Ensign Group has a beta of 0.84, suggesting that its share price is 16% less volatile than the S&P 500. Comparatively, AAC Holdings has a beta of 2.09, suggesting that its share price is 109% more volatile than the S&P 500.

Institutional & Insider Ownership

84.4% of The Ensign Group shares are held by institutional investors. Comparatively, 48.0% of AAC Holdings shares are held by institutional investors. 6.2% of The Ensign Group shares are held by company insiders. Comparatively, 37.3% of AAC Holdings shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares The Ensign Group and AAC Holdings’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
The Ensign Group $1.71 billion 0.63 $119.84 million $0.83 25.53
AAC Holdings $264.87 million 0.58 $27.46 million ($0.08) -80.13

The Ensign Group has higher revenue and earnings than AAC Holdings. AAC Holdings is trading at a lower price-to-earnings ratio than The Ensign Group, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for The Ensign Group and AAC Holdings, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The Ensign Group 2 0 4 0 2.33
AAC Holdings 0 2 0 1 2.67

The Ensign Group currently has a consensus target price of $22.50, indicating a potential upside of 6.18%. AAC Holdings has a consensus target price of $21.33, indicating a potential upside of 232.81%. Given AAC Holdings’ stronger consensus rating and higher probable upside, analysts clearly believe AAC Holdings is more favorable than The Ensign Group.

Dividends

The Ensign Group pays an annual dividend of $0.17 per share and has a dividend yield of 0.8%. AAC Holdings does not pay a dividend. The Ensign Group pays out 20.5% of its earnings in the form of a dividend.

Summary

The Ensign Group beats AAC Holdings on 10 of the 16 factors compared between the two stocks.

The Ensign Group Company Profile

The Ensign Group, Inc., through its operating subsidiaries, provides healthcare services across the post-acute care continuum, as well as other ancillary businesses located in Arizona, California, Colorado, Idaho, Iowa, Kansas, Nebraska, Nevada, Oregon, South Carolina, Texas, Utah, Washington and Wisconsin. The Company’s subsidiaries provide skilled nursing, assisted living, home health and hospice, and other ancillary services. Its segments include transitional and skilled services segment, which includes the operation of skilled nursing facilities; assisted and independent living services segment, which includes the operation of assisted and independent living facilities; home health and hospice services segment, which includes its home health, home care and hospice businesses, and all other segment, which includes mobile diagnostics and other ancillary operations. As of May 11, 2017, it operated in 215 healthcare facilities. The Company operates across 14 states.

AAC Holdings Company Profile

AAC Holdings, Inc. is a provider of inpatient and outpatient substance abuse treatment services for individuals with drug and alcohol addiction. The Company performs drug testing and diagnostics laboratory services and provides physician services to its clients. As of June 30, 2016, the Company operated 12 residential substance abuse treatment facilities located throughout the United States, focused on delivering clinical care and treatment solutions across 1,139 beds, which includes 636 licensed detoxification beds, and 18 standalone outpatient centers. In addition, the Company focuses on expanding The Oxford Centre facility. As of June 30, 2016, the Company’s capacity at its Forterus treatment facility was 14 beds. The Company is engaged in deploying research-based treatment programs with structured curricula for detoxification, residential treatment, partial hospitalization and intensive outpatient care. The Company is also an Internet marketer in the addiction treatment industry.

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