Senior living provider The Pennant Group (NASDAQ: PNTG) announced better-than-expected revenue in Q2 CY2025, with sales up 30.1% year on year to $219.5 million. The company’s full-year revenue guidance of $870.2 million at the midpoint came in 2.1% above analysts’ estimates. Its GAAP profit of $0.20 per share was 17.9% below analysts’ consensus estimates.

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“The second quarter represents a continuation of our robust operating momentum,” said Brent Guerisoli, the Company’s Chief Executive Officer.

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.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, The Pennant Group’s 17.1% annualized revenue growth over the last five years was impressive. 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 26.2% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can better understand the company’s revenue dynamics by analyzing its number of admissions, which reached 17,832 in the latest quarter. Over the last two years, The Pennant Group’s admissions averaged 27.9% year-on-year growth. Because this number is better than its revenue growth, we can see the company’s average selling price decreased.

This quarter, The Pennant Group reported wonderful year-on-year revenue growth of 30.1%, and its $219.5 million of revenue exceeded Wall Street’s estimates by 4.2%.

Looking ahead, sell-side analysts expect revenue to grow 11% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is noteworthy and suggests the market is forecasting success for its products and services.

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Operating Margin

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 2.3 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q2, The Pennant Group generated an operating margin profit margin of 5.3%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

The Pennant Group’s EPS grew at a remarkable 11.2% compounded annual growth rate over the last five years. Despite its operating margin improvement during that time, this performance was lower than its 17.1% annualized revenue growth, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.

Diving into the nuances of The Pennant Group’s earnings can give us a better understanding of its performance. A five-year view shows The Pennant Group has diluted its shareholders, growing its share count by 19.3%. This dilution overshadowed its increased operating 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 Q2, The Pennant Group reported EPS at $0.20, up from $0.18 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects The Pennant Group’s full-year EPS of $0.78 to grow 35.4%.

Key Takeaways from The Pennant Group’s Q2 Results

We were impressed by how significantly The Pennant Group blew past analysts’ full-year EPS guidance expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. On the other hand, its EPS missed and its sales volume fell short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The stock traded up 5.3% to $23.45 immediately following the results.

Sure, The Pennant Group had a solid quarter, but if we look at the bigger picture, is this stock a buy? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.