Compare Encompass Health Corporation (EHC) vs Tenet Healthcare Corporation (THC) Stock

Tenet Healthcare Corporation (THC) offers the better valuation at 15.5x trailing P/E (14.1x forward), making it the more compelling value choice. Analysts rate Encompass Health Corporation (EHC) a "Buy" — based on 26 analyst ratings — the highest consensus in this comparison. The "better buy" depends entirely on your goals: growth investors should weight revenue trajectory, value investors should weight P/E and PEG, and income investors should weight dividend yield and streak.

On trailing P/E, Tenet Healthcare Corporation (THC) is the cheapest at 15.5x versus Encompass Health Corporation at 19.4x. On forward P/E, Tenet Healthcare Corporation is actually cheaper at 14.1x. The PEG ratio (P/E divided by earnings growth rate) is the most growth-adjusted single valuation metric: Tenet Healthcare Corporation wins at 0.43x versus Encompass Health Corporation's 1.28x — a PEG below 1.0 traditionally signals the market is underpricing earnings growth.

Over the past 5 years, Tenet Healthcare Corporation (THC) delivered a total return of +352.7%, compared to +75.5% for Encompass Health Corporation (EHC). A $10,000 investment in THC five years ago would be worth approximately $45K today (assuming dividends reinvested). Over 10 years, the gap is even starker: THC returned +864.5% versus EHC's +312.9%. Past returns do not guarantee future results, and the stock with the higher historical return may already have its best growth priced in.

By beta (market sensitivity over 5 years), Encompass Health Corporation (EHC) is the lower-risk stock at 0.49β versus Tenet Healthcare Corporation's 0.93β — meaning THC is approximately 89% more volatile than EHC relative to the S&P 500. On balance sheet safety, Encompass Health Corporation (EHC) carries a lower debt/equity ratio of 8% versus 147% for Tenet Healthcare Corporation — giving it more financial flexibility in a downturn.

Encompass Health Corporation (EHC) is the more profitable company, earning 9.5% net margin versus 6.6% for Tenet Healthcare Corporation — meaning it keeps 9.5% of every revenue dollar as bottom-line profit. Operating margin tells a similar story: THC leads at 16.5% versus 12.8% for EHC. At the gross margin level — before operating expenses — EHC leads at 47.5%, reflecting greater pricing power or product mix advantage. Stronger margins indicate durable pricing power, lower cost of revenue, or higher mix of software/services. They are one of the clearest signs of business quality.

The PEG ratio (forward P/E divided by expected earnings growth rate) is the most precise measure of undervaluation relative to growth potential. By this metric, Tenet Healthcare Corporation (THC) is the more undervalued stock at a PEG of 0.43x versus Encompass Health Corporation's 1.28x. A PEG below 1.0 is traditionally considered the threshold for growth-adjusted undervaluation. On forward earnings alone, Tenet Healthcare Corporation (THC) trades at 14.1x forward P/E versus 18.2x for Encompass Health Corporation — 4.1x cheaper on a one-year earnings basis. Analyst consensus price targets imply the most upside for EHC: 40.4% to $151.50.

In this comparison, EHC (0.6% yield) pays a dividend. THC does not pay a meaningful dividend and should not be held primarily for income.

For long-horizon retirement investors, Encompass Health Corporation (EHC) is the stronger choice — it scores higher on the combination of lower volatility, dividend reliability, and long-term compounding (low volatility (β 0.49), 0.6% yield, +312.9% 10Y return). Both have compounded well over 10 years (EHC: +312.9%, THC: +864.5%), confirming both are viable long-term holds — but the lower-volatility option typically results in less emotional selling during corrections. Retirement portfolios generally favour predictability over maximum returns. Consult a financial advisor before making allocation decisions.

Both stocks operate in the Healthcare sector, making this a peer-level intra-sector comparison — the same macro tailwinds and headwinds will affect both. In terms of investment character: EHC is a mid-cap quality compounder stock; THC is a mid-cap deep-value stock. EHC pays a dividend while THC does not, making them suitable for different income and tax situations. These fundamental differences mean investors should not choose between them on a single metric — the "better stock" depends entirely on which of these characteristics aligns with your investment strategy.