Chemed (CHE) AI Stock Analysis

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Chemed

(NYSE:CHE)

75Outperform

Chemed's overall stock score reflects its strong financial performance and robust growth prospects, particularly within its VITAS segment. However, challenges in Roto Rooter's EBITDA and valuation concerns weigh on the score. The technical analysis suggests stable market conditions, with no strong momentum in either direction. The earnings call highlighted growth opportunities but also noted potential risks in revenue management and contractor performance.

Positive Factors

Market Demand

Google searches for 'plumbing' in Q1 2025 jumped 16% quarter-over-quarter, indicating strong demand for Roto-Rooter services.

Pricing Power

Roto has the ability to push higher prices to consumers while most of its services are need-based, providing a potential advantage.

Revenue Growth

Roto revenues came in much better and grew year over year, which is a welcome sign given the declines last year.

Negative Factors

Regulatory Challenges

Given the increase in the Medicare cap is below the overall Medicare rate increase for Vitas, Vitas would be over the cap in some of its markets.

Revenue Decline

Vitas Q4 revenues were 3% below estimate and 1% below consensus due to worse margins from hurricanes and lower acuity headwind.

Chemed (CHE) vs. S&P 500 (SPY)

Market Cap

$8.46B

Dividend Yield0.33%

Average Volume (3M)135.15K

Price to Earnings (P/E)28.2

Beta (1Y)0.19

Revenue Growth8.52%

EPS Growth10.36%

CountryUS

Employees15,695

SectorHealthcare

Sector Strength41

IndustryMedical - Care Facilities

Share Statistics

EPS (TTM)5.63

Shares Outstanding14,629,484

10 Day Avg. Volume134,105

30 Day Avg. Volume135,150

Financial Highlights & Ratios

PEG Ratio8.91

Price to Book (P/B)7.06

Price to Sales (P/S)0.00

P/FCF Ratio26.48

Enterprise Value/Market Cap0.98

Enterprise Value/Revenue0.86

Enterprise Value/Gross Profit9.96

Enterprise Value/Ebitda4.69

Forecast

1Y Price Target

$677.33

Price Target Upside17.18% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering3

Chemed Business Overview & Revenue Model

Company DescriptionChemed Corporation (CHE) is a diversified public company headquartered in Cincinnati, Ohio, operating in the healthcare and service sectors. Chemed's primary business segments include VITAS Healthcare, which provides hospice care services, and Roto-Rooter, a widely recognized name in plumbing and drain cleaning services. VITAS Healthcare offers end-of-life care to patients with terminal illnesses, focusing on enhancing the quality of life. Meanwhile, Roto-Rooter provides residential and commercial plumbing repair and maintenance services across the United States and Canada.

How the Company Makes MoneyChemed Corporation generates revenue through its two main business segments: VITAS Healthcare and Roto-Rooter. VITAS Healthcare earns money by providing hospice care services, which are typically reimbursed by Medicare, Medicaid, and private insurance. The revenue model involves offering comprehensive end-of-life care, which includes medical support, palliative care, and bereavement services to terminally ill patients, often resulting in predictable cash flows due to the nature of insurance reimbursement. Roto-Rooter, on the other hand, generates income by providing a wide range of plumbing and drain cleaning services to both residential and commercial clients. This segment charges fees for service calls, repairs, maintenance, and installation, contributing to its revenue stream. The company's earnings are further supported by its strong brand recognition, extensive service network, and strategic acquisition of complementary businesses to expand its market reach.

Chemed Financial Statement Overview

Summary

Chemed exhibits strong financial health characterized by consistent revenue growth, healthy profitability, and effective cash flow management. The company's low leverage and strong equity position provide financial stability, although careful monitoring of cash reserves and debt levels is advisable.

Income Statement

Very Positive

Chemed's income statement shows a strong financial performance with consistent revenue growth, achieving a 3% increase in the latest TTM (Trailing-Twelve-Months) compared to the previous year. The company maintains healthy profit margins, with a TTM gross profit margin of 51.5% and a net profit margin of 12.4%. EBIT and EBITDA margins have remained stable, indicating effective cost management. However, the net profit margin shows a slight decrease from the previous year's 12.4%, suggesting some margin pressure.

Balance Sheet

Positive

The balance sheet reveals a solid financial position with a low debt-to-equity ratio of 0.12, indicating conservative leverage. The equity ratio is robust at 68.5%, reflecting strong shareholder equity relative to total assets. Return on equity is substantial at 26.1%, highlighting efficient use of equity. However, the decrease in cash and short-term investments and a slight increase in debt over the years may pose potential risks if not managed carefully.

Cash Flow

Very Positive

Chemed demonstrates strong cash flow management with a healthy operating cash flow to net income ratio of 1.18, indicating effective conversion of profits into cash. The free cash flow to net income ratio is robust at 1.02, reflecting solid free cash flow generation. While the free cash flow growth rate has seen some fluctuations, overall cash flow stability supports the company's financial flexibility and ability to invest in growth opportunities.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.49B	2.43B	2.26B	2.13B	2.14B	2.08B
	Gross Profit
834.92M	854.35M	796.55M	765.09M	769.80M	701.39M
	EBIT
388.92M	366.49M	340.57M	343.50M	343.04M	389.68M
	EBITDA
452.20M	464.29M	414.34M	393.44M	411.23M	454.93M
	Net Income Common Stockholders
308.74M	302.00M	272.51M	249.62M	268.55M	319.47M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
173.88M	178.35M	263.96M	74.13M	32.90M	162.68M
	Total Assets
1.73B	1.67B	1.67B	1.44B	1.34B	1.43B
	Total Debt
145.06M	140.84M	155.11M	247.01M	323.54M	135.41M
	Net Debt
-28.82M	-37.51M	-108.85M	172.88M	290.65M	-27.27M
	Total Liabilities
544.75M	549.58M	560.22M	643.30M	719.45M	533.71M
	Stockholders Equity
1.18B	1.12B	1.11B	798.72M	623.27M	901.20M
Cash Flow		Free Cash Flow
315.04M	367.97M	273.44M	252.56M	249.92M	430.46M
	Operating Cash Flow
365.69M	417.50M	330.30M	309.89M	308.60M	489.29M
	Investing Cash Flow
-138.20M	-143.91M	-60.64M	-59.40M	-57.76M	-61.56M
	Financing Cash Flow
-366.96M	-359.19M	-79.83M	-209.25M	-380.62M	-271.21M

Chemed Technical Analysis

Technical Analysis Sentiment

Positive

Last Price578.02

Price Trends

50DMA

587.19

Negative

100DMA

568.65

Positive

200DMA

570.41

Positive

Market Momentum

MACD

-4.70

Negative

RSI

52.58

Neutral

STOCH

48.74

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CHE, the sentiment is Positive. The current price of 578.02 is above the 20-day moving average (MA) of 569.89, below the 50-day MA of 587.19, and above the 200-day MA of 570.41, indicating a neutral trend. The MACD of -4.70 indicates Negative momentum. The RSI at 52.58 is Neutral, neither overbought nor oversold. The STOCH value of 48.74 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CHE.

Chemed Risk Analysis

Chemed disclosed 25 risk factors in its most recent earnings report. Chemed reported the most risks in the “Ability to Sell” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Chemed Peers Comparison

Overall Rating

UnderperformOutperform

Sector (52)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
OPCH	78 Outperform	$5.44B	26.54	15.38%	―	16.98%	-17.76%
ENSG	78 Outperform	$8.61B	28.13	17.66%	0.16%	16.80%	39.99%
CHE	75 Outperform	$8.46B	28.25	26.11%	0.33%	8.52%	10.36%
AMED	68 Neutral	$3.11B	35.02	7.85%	―	5.34%	―
EHC	68 Neutral	$12.18B	24.95	25.33%	0.55%	11.21%	30.38%
SEM	64 Neutral	$1.97B	11.42	10.38%	2.85%	-8.86%	-36.22%
Sector *	52 Neutral	$5.19B	3.04	-44.64%	2.82%	16.45%	-0.53%

* Healthcare Sector Average

Performance Comparison

CHE

Chemed

578.02

15.60

2.77%

AMED

Amedisys

94.12

-2.01

-2.09%

OPCH

Option Care Health

33.09

4.03

13.87%

EHC

Encompass Health

121.18

35.67

41.71%

SEM

Select Medical

15.20

-2.74

-15.27%

ENSG

The Ensign Group

147.70

28.36

23.76%

Chemed Earnings Call Summary

Earnings Call Date:Apr 23, 2025

(Q1-2025)

% Change Since: -1.27%|

Next Earnings Date:Jul 23, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed outlook with strong growth in VITAS admissions and revenue, supported by strategic acquisitions such as Covington Health. However, Roto Rooter faced challenges with declining EBITDA and contractor revenue, alongside the need to carefully manage Medicare cap constraints. While there are positive growth indicators, particularly for VITAS, Roto Rooter's performance and cap management issues present notable hurdles.

Q1-2025 Updates

Positive Updates

Strong Growth in VITAS Admissions

VITAS admissions totaled 18,139 in the first quarter of 2025, a 7.3% improvement compared to the same period in 2024. The average daily census expanded by 13.1% to 22,244.

VITAS Revenue and EBITDA Increase

VITAS net revenue was $407.4 million in Q1 2025, a 15.1% increase from the prior year. Adjusted EBITDA, excluding Medicare cap, grew by 15.9% to $70.3 million.

Acquisition of Covington Health Boosts Performance

The Covington Health acquisition, completed on April 17, 2024, positively impacted revenue, adjusted net income, and EBITDA by 3-4%.

Roto Rooter Commercial Revenue Growth

Roto Rooter branch commercial revenue increased by 7.3% in Q1 2025, driven by a 38% rise in excavation and a 14% increase in water restoration.

Negative Updates

Decline in Roto Rooter's Overall EBITDA

Roto Rooter's adjusted EBITDA decreased by 2.4% compared to the prior year quarter, with a margin decline of 108 basis points.

Reduction in Revenue from Independent Contractors

Revenue from Roto Rooter's independent contractors declined by 6.4% in Q1 2025 compared to the same period in 2024.

Challenges with Medicare Cap Management

The focus on hospital-based admissions, which come later in the disease trajectory, limits revenue and EBITDA margin growth but provides needed Medicare cap cushion.

Company Guidance

During Chemed Corporation's First Quarter 2025 Earnings Conference Call, the company provided a comprehensive overview of its financial performance and strategic initiatives. Key metrics included VITAS admissions totaling 18,139, an increase of 7.3% from the previous year, and an average daily census (ADC) of 22,244, up 13.1% year-over-year. VITAS net revenue rose by 15.1% to $407.4 million, with adjusted EBITDA growing 15.9% to $70.3 million. The acquisition of Covington Health contributed positively to revenue and EBITDA by 3-4%. Roto Rooter reported a 1.8% revenue increase, with branch residential and commercial revenues rising by 1.7% and 7.3%, respectively. Despite a 6.4% decline in revenue from independent contractors, Roto Rooter's adjusted EBITDA margin stood at 24.7%. The call highlighted strategic efforts to manage the Medicare cap and expand operations in Florida, with new programs in Pasco and Marion counties. Chemed maintained its earnings guidance and expressed optimism about sustaining growth through organic expansion and acquisitions.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.