Is EHAB a safe investment?

**Enhabit (EHAB) does not appear to be a safe investment at this time**, and here's why:

1. **High Debt Levels**: EHAB has a significant debt burden, with a total liabilities of $662.6 million as of March 31, 2025. The company's debt-to-equity ratio is 0.85%, which indicates that the company relies heavily on debt financing. A high debt level can lead to increased financial risk and may impact the company's ability to make interest payments.

|code|Ticker|Name|Date|Free Cash Flow|Debt-to-Equity Ratio|market_code|
|---|---|---|---|---|---|---|
|EHAB|EHAB.N|Enhabit|2024 Q2||0.7594272753047916|169|
|EHAB|EHAB.N|Enhabit|2024 Q3|-4.39388862E7|0.8795785248369292|169|
|EHAB|EHAB.N|Enhabit|2024 Q4|-7.70861284E7|0.9304928687488716|169|
|EHAB|EHAB.N|Enhabit|2025 Q1|3.73038656E7|0.85435199720914|169|

|code|Ticker|Name|Date|Quick Ratio|market_code|
|---|---|---|---|---|---|
|EHAB|EHAB.N|Enhabit|||169|

2. **Interest Coverage Ratio**: The company's interest coverage ratio is 3.74, which suggests that EHAB has a moderate ability to cover its interest expenses with its earnings before interest and taxes (EBIT). However, this ratio is below some industry standards, which could be a concern for investors regarding the company's debt servicing capacity.

|code|Ticker|Name|Date|Debt-to-Equity Ratio|market_code|
|---|---|---|---|---|---|
|EHAB|EHAB.N|Enhabit|2024 Q2|0.7594272753047916|169|
|EHAB|EHAB.N|Enhabit|2024 Q3|0.8795785248369292|169|
|EHAB|EHAB.N|Enhabit|2024 Q4|0.9304928687488716|169|
|EHAB|EHAB.N|Enhabit|2025 Q1|0.85435199720914|169|

3. **Free Cash Flow**: While EHAB has a positive free cash flow of $17.6 million, this amount needs to be considered in the context of the company's total debt level. Free cash flow is a critical metric for assessing a company's ability to generate cash after accounting for capital expenditures and other investments.
4. **Stock Performance and Analyst Sentiments**: EHAB's stock has experienced significant price drops, with some analysts suggesting the stock is undervalued but with concerns about revenue growth and profitability. The company's stock performance and analyst sentiments indicate that investors may have reservations about the company's future prospects and ability to generate returns on investment.
5. **Balance Sheet Health**: Although there is some historical improvement in debt levels (from $542.5 million to $483.3 million over a year), the company's net debt remains substantial at approximately $443.8 million. The quick ratio, which indicates the company's ability to meet short-term liabilities with quick assets, is not provided, which limits a comprehensive assessment of the company's liquidity and solvency.

In conclusion, while EHAB has shown some positive financial metrics, such as free cash flow and growth in certain healthcare services, the company's high debt levels, interest coverage ratio, and stock performance indicate that it may not be a safe investment at this time. Investors should exercise caution and consider these factors alongside the company's strategic initiatives and market conditions.