Chicago, Illinois – July 3, 2025 – Today, Zacks Equity Research is based at Quest Diagnostics Inc. DGX, Health Corp. EHC, Davita Inc. DVA, Pennant Group, Inc. Includes PNTG.
Link: https://www.zacks.com/commentary/2560296/4-stocks-to-watch-in-a-rapidly-shifting-autpatient-home-health-health-health-health-
Zacks Medical – The outpatient and home healthcare industry is witnessing a rapid shift towards digital healthcare treatment. Over the past few years, demand for telehealth-centric online healthcare and technology services powered by artificial intelligence (AI) has increased dramatically.
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The rise in the global population of elderly people requires many healthcare companies that were not technology-based to provide technology-enabled services to survive in the market. According to a report by Grand View Research, the global home health market was valued at $39.024 billion in 2023, and is expected to witness a CAGR of around 7.9% between 2024 and 2030.
On a positive note, the growing dependence on telehealth and AI could help industries thrive in the short term. Quest Diagnostics Inc., Encompass Health Corp., Davita Inc., Pennant Group, Inc.. can be derived from prospects.
The industry consists of companies providing outpatient or at home walking care. They use advanced medical technology for diagnosis, treatment and rehabilitation services. Players include operators from HMO Medical Centers, Kidney Dialysis Centers and other outpatient care centers.
After navigating through a tough pandemic era, payers and providers have seen steady growth behind service innovation. This supports optimism about the outlook over the coming years, but sustained inflation in consumer prices could inspire outlook.
The possibility of expanding innovation driven by pandemic pressures on the health care system is an additional plus. Additionally, the acceleration of value-based care models and the increase in technology adoption across the healthcare industry may continue in the long term.
Aging: One of the major drivers of the home healthcare market is the elderly world population. As people live longer, there is a growing demand for services that cater to chronic disease management, rehabilitation and daily life assistance. An increase in the number of elderly people is expected to increase the need for home health services.
Cost-effectiveness: The main advantage of outpatient clinics is cost-effectiveness. Outpatient medical clinics do not hold patients for long periods (overnight) or prohibitively bill them. Modern outpatient clinics offer a wide range of treatment and diagnostic options, as well as mild surgical procedures. Financial incentives such as payment policies from government programs that support services in low-cost care settings also promote outpatient care.
Furthermore, as the future of healthcare, the shift from service fees (FFS) to alternative payment models (APM) is a continuous parallel trend. FF is important for caring for your organization as a benchmark that providers can evaluate APMs.
The dominant role of AI: AI has been a huge success in healthcare. Outpatient companies prefer bots and automated technologies to manage health information. With the help of AI, hospitals are achieving better results, and patients are receiving more efficient and personalized care. The foreign industry generates enormous profits from electronic health records (EHRS) and elections.
Technological advancements: Virtual assistants and chatbots can help patients by answering questions about care and linking them with the information they need to make more informed decisions about care. Increasingly, it interfaces with EHR systems and is used to book and schedule reservations. It also helps keep patients in their hands as they take medication and exercise.
Home healthcare can be obtained from benefits provided by Medicare (and several other payers). This constitutes a wide range of services that can be provided in the patient's home, including postoperative and chronic wound care. Home healthcare has seen a surge in use of telehealth platforms in response to the pandemic. With the growing elderly population and increasing costs of face-to-face health care, demand for home health care is increasing. People with chronic illnesses and disabilities also need home care.
Staff shortage: The US healthcare industry is experiencing a severe shortage of workers at all levels. Some support staff have laxatives from home healthcare aides. An increase in international migration of healthcare workers can exacerbate the shortage of healthcare workers, especially in low- and low- and middle-income countries. Another reason for the sharp understaffing is burnout due to physical, emotional and mental fatigue. Therefore, these overworked employees leave their occupation at an accelerated rate.
Tariff Impact: The newly imposed US tariffs have significantly increased the costs of imported medical supplies, putting a burden on home health providers who are already operating at tight margins. It aims to promote domestic production, but immediate investment remains limited and supply chain disruptions continue. As a result, home health services face rising operating costs and product shortages, which undermine supply reliability rather than strengthening it as originally intended.
Zacks Medical – The outpatient and home healthcare industry falls into the broader Zacks healthcare sector. It has ranked #47 in the Zacks industry, making it the top 19% of Zacks Industries, nearly 250.
The group's Zacks industry rank is basically average for Zacks ranks of all member stocks, giving a promising short-term outlook. Our research shows that the top 50% of Zacks-ranked industries outperform the bottom 50% above the 2:1 coefficient.
Before we introduce some of the outpatient home health stocks you want to consider in your portfolio, let's take a look at the recent stock market performance and ratings of the industry.
The industry has surpassed that sector, but has fallen below the S&P 500 composite over the past year.
The industry has scored 6.8% over this period, compared to a 12.1% increase in the S&P 500 and a 12% decrease in the broader sector.
Based on revenue (P/E) from 12-month prices commonly used to valuate medical stocks, the industry is currently trading at 19.8 times, compared to 22.3 times the S&P 500 and 19 times the sector.
Over the past five years, the industry has been down to 25.3 times, down to 17.1 times, with a median of 20.2 times.
Quest Diagnostics: Quest Diagnostics, a well-known diagnostic information service provider, reported its results for the first quarter of April. The company's top line benefited from the rebound in demand in March. Growth has been brought about by a robust ingestion of acquisitions and contributions from large enterprise accounts, as well as Quest Diagnostics' Advanced Diagnostics portfolio and health plan access. DGX has Zacks rank #2 (purchase).
The New Jersey-based Secaucus's Zacks Consensus estimate of revenue for 2025 suggests a growth of 9.2%. The same thing about revenue shows an 8.6% increase.
Quest Diagnostics' 15.1% equity return (ROE) is compared favorably with the industry's 7.9%.
Health: Siege Health (the renowned owner and operator of inpatient rehabilitation hospital) has announced a spare plan to build an independent, 50-bed inpatient rehabilitation hospital in North Las Vegas, New Hampshire (June), and another plan for the Water Set Master Plan community at Apollo Beach, Apollo Beach.
The EHC is currently carrying Zacks rank #2. Here you can see the full list of today's Zacks #1 rank (strong purchase) stocks.
In the AL-based Birmingham, Zacks Consensus estimates of revenue for 2025 suggest a growth of 9.5%. The same thing about revenue shows an increase of 13.1%.
Including 17.6% Health's ROE is a positive comparison with 7.9% in the industry.
Pennant Group: The parent company of Pennant Group, a related home health, hospice and advanced living company. This month, Pennant Group announced the acquisition of GrandCare Health Services, the premier home healthcare provider. The newly acquired agent known as GrandCare Home Health is expected to serve California's Los Angeles, Orange, Riverside and San Diego counties, expanding the area of service for Pennant Groups in the area. PNTG has a Zacks rank of 2.
For this ID-based Eagle, Zacks Consensus estimates of revenue for 2025 suggest a growth of 23.3%. The same thing about revenue shows an increase of 18.1%.
The ROE of Pennant Group at 10.7% is compared favorably with 7.9% in the industry.
Davita: Davita, a well-known global comprehensive kidney care provider, reported its results for the first quarter of 2025 in May. The company registered a rise on the top line and recorded revenue per treatment. Revenues for solid dialysis patient services and daily increases in total US dialysis treatments for the first quarter were also recorded.
On the proceeds call, management confirmed that Davita had distributed phosphate binders for doctor's orders and received a refund from the CMS and Medicare Advantage Plan during the initial TDAPA period. Management was optimistic about the contribution of these drugs to the company's full-year operating profit. DVA has Zacks rank #3 (hold).
In Denver, a co-based Denver, Zacks Consensus estimates of revenue for 2025 suggest a growth of 5.2%. The same thing about revenue shows an 11.2% increase.
Davita's ROE of 176.1% is compared favorably with 7.9% in the industry.
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Quest Diagnostics Incorporated (DGX): Free Stock Analysis Report
Davita Inc. (DVA): Free Stock Analysis Report
Encompass Health Corporation (EHC): Free Stock Analysis Report
Pennant Group, Inc. (PNTG): Free Stock Analysis Report
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