The Pennant Group (PNTG)

Senior living provider The Pennant Group (NASDAQ:PNTG) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 26.8% year on year to $229 million. The company’s full-year revenue guidance of $930 million at the midpoint came in 3.5% above analysts’ estimates. Its non-GAAP profit of $0.30 per share was 4.6% above analysts’ consensus estimates.

Company Overview

Spun off from The Ensign Group in 2019 to focus on non-skilled nursing healthcare services, Pennant Group (NASDAQ:PNTG) operates home health, hospice, and senior living facilities across 13 western and midwestern states, serving patients of all ages including seniors.

The senior health, home care, and hospice care industries provide essential services to aging populations and patients with chronic or terminal conditions. These companies benefit from stable, recurring revenue driven by relationships with patients and families that can extend many months or even years. However, the labor-intensive nature of the business makes it vulnerable to rising labor costs and staffing shortages, while profitability is constrained by reimbursement rates from Medicare, Medicaid, and private insurers. Looking ahead, the industry is positioned for tailwinds from an aging population, increasing chronic disease prevalence, and a growing preference for personalized in-home care. Advancements in remote monitoring and telehealth are expected to enhance efficiency and care delivery. However, headwinds such as labor shortages, wage inflation, and regulatory uncertainty around reimbursement could pose challenges. Investments in digitization and technology-driven care will be critical for long-term success.

Pennant Group competes with other home health and senior living providers including Amedisys (NASDAQ:AMED), LHC Group (owned by UnitedHealth Group, NYSE:UNH), Brookdale Senior Living (NYSE:BKD), and Encompass Health (NYSE:EHC).

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $847.3 million in revenue over the past 12 months, The Pennant Group is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, The Pennant Group grew its sales at an impressive 17.9% compounded annual growth rate. Its growth beat the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. The Pennant Group’s annualized revenue growth of 27.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its number of admissions, which reached 13,423 in the latest quarter. Over the last two years, The Pennant Group’s admissions averaged 25.8% year-on-year growth. Because this number is in line with its revenue growth, we can see the company kept its prices fairly consistent.

This quarter, The Pennant Group reported robust year-on-year revenue growth of 26.8%, and its $229 million of revenue topped Wall Street estimates by 3%.

Looking ahead, sell-side analysts expect revenue to grow 21.5% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is commendable and suggests the market sees success for its products and services.

The Pennant Group was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.2% was weak for a healthcare business.

On the plus side, The Pennant Group’s operating margin rose by 2.6 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, The Pennant Group generated an operating margin profit margin of 4.5%, down 1.5 percentage points year on year. This reduction is quite minuscule and indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

The Pennant Group’s EPS grew at a solid 7.8% compounded annual growth rate over the last five years. Despite its operating margin improvement during that time, this performance was lower than its 17.9% annualized revenue growth, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.

We can take a deeper look into The Pennant Group’s earnings quality to better understand the drivers of its performance. A five-year view shows The Pennant Group has diluted its shareholders, growing its share count by 16.6%. This dilution overshadowed its increased operational efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, The Pennant Group reported adjusted EPS of $0.30, up from $0.26 in the same quarter last year. This print beat analysts’ estimates by 4.6%. Over the next 12 months, Wall Street expects The Pennant Group’s full-year EPS of $1.08 to grow 18.2%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

The Pennant Group has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1%, subpar for a healthcare business.

Taking a step back, an encouraging sign is that The Pennant Group’s margin expanded by 7.7 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

The Pennant Group historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.3%, somewhat low compared to the best healthcare companies that consistently pump out 20%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, The Pennant Group’s ROIC averaged 4.4 percentage point increases each year. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

The Pennant Group reported $2.34 million of cash and $302.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $63.86 million of EBITDA over the last 12 months, we view The Pennant Group’s 4.7× net-debt-to-EBITDA ratio as safe. We also see its $2.04 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by The Pennant Group’s optimistic full-year revenue guidance, which blew past analysts’ expectations. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $25.17 immediately following the results.

Updated: December 4, 2025 at 11:04 PM EST

Are you wondering whether to buy The Pennant Group or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

The Pennant Group has some positive attributes, but it isn’t one of our picks. First off, its revenue growth was impressive over the last five years and is expected to accelerate over the next 12 months. And while The Pennant Group’s subscale operations give it fewer distribution channels than its larger rivals, its growth in admissions was surging.

The Pennant Group’s P/E ratio based on the next 12 months is 22.6x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $34.67 on the company (compared to the current share price of $28.86).