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CHE

Chemed NYSE:CHE Stock Report

Last Price

US$436.56

Market Cap

US$6.5b

7D

-3.4%

1Y

-4.6%

Updated

02 Oct, 2022

Data

Company Financials +
CHE fundamental analysis
Snowflake Score
Valuation3/6
Future Growth0/6
Past Performance3/6
Financial Health4/6
Dividends0/6

CHE Stock Overview

Chemed Corporation provides hospice and palliative care services to patients through a network of physicians, registered nurses, home health aides, social workers, clergy, and volunteers primarily in the United States.

Chemed Corporation Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Chemed
Historical stock prices
Current Share PriceUS$436.56
52 Week HighUS$539.87
52 Week LowUS$403.00
Beta0.51
1 Month Change-7.31%
3 Month Change-9.22%
1 Year Change-4.64%
3 Year Change5.84%
5 Year Change114.51%
Change since IPO2,359.49%

Recent News & Updates

Oct 01
Does Chemed (NYSE:CHE) Have A Healthy Balance Sheet?

Does Chemed (NYSE:CHE) Have A Healthy Balance Sheet?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that...

Sep 16
Capital Investment Trends At Chemed (NYSE:CHE) Look Strong

Capital Investment Trends At Chemed (NYSE:CHE) Look Strong

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things...

Aug 26

Buy Chemed To Reduce Equity Beta And Stabilize Portfolio Returns

Summary Chemed continues to demonstrate the factors of resiliency that investors are paying a premium for in H2 FY22. The company presents with above-market return on invested capital whilst NOPAT and FCF remain seasonally high. Shares look to be fairly priced when factoring in forward earnings estimates. We advocate investors seeking to smooth equity returns and reduce equity beta to buy CHE at current ranges. Investment summary Investors should be seeking to add a constant weight of quality and resiliency throughout cross-asset and equity focused portfolios in FY22. Portfolio construction should factor in stability of price returns as a defensive characteristic in the equity risk budget. Those names with mature growth cycles and in defensible industries such as healthcare may act as a stabilizer to equity returns on a forward looking basis. Exhibit 1. CHE 6-month price action, followed by CHE 5-year price action Data: Updata Data: Updata In that vein, we look to Chemed Corporation (CHE), diversified provider of hospice and palliative care services in the US. We like the company's ability to compound capital at 8.5% geometrically on a quarterly basis since FY15, and note that gross-to-operating margins have decompressed on a sequential basis in that time. We advocate to buy CHE if seeking to add a layer of resiliency into portfolios by clamping equity beta and smoothing equity returns. Shares look to be appropriately priced at 10.8x EV/book value and we set a forward price objective of $526. Q2 earnings in-line with long-term trends Second quarter earnings came in mixed with downsides relative to consensus at the top line. Consolidated revenue for CHE total was $531 million, down 20bps YoY. Segmentally, Vitas printed $298 million in net revenue ($305 million gross), down ~450bps YoY. The decline was underlined by a ~380bps YoY decrease in number of days of care, whereas acuity mix shift produced a 174bps headwind compared to the same time last year. Accounting changes to contra-revenue accounts coupled with the Medicare Cap also clamped revenue by ~10bps, with ~$2 million in billing limitations accrued during the quarter. Meanwhile, the Roto-Rooter segment contributed $233 million to the top, up 600bps YoY. Upsides were seen from branch commercial revenue, up 750bps YoY. This carried through to aggregate commercial revenue growth across all segments, as seen in Exhibit 2. Exhibit 2. CHE consolidated statement of revenues Data: CHE 10-Q Q2 FY22 Resiliency is a key factor in CHE's earnings quality, with seasonal trends in profitability and cash conversion. For example, operating metrics were back in range as well and remain seasonal in-line with capital budgeting cycles within the healthcare sector. As seen in Exhibit 3, gross profit and operating profit have remained resilient throughout the pandemic and came in at $88 million last quarter. Bottom-line fundamentals continue to strengthen too. It recognized GAAP EPS of $4.84, up 38% YoY. Meanwhile, the company printed $38 million in net-FCF, down 60% YoY, but in line with the seasonality in quarterly growth trends, as seen below. FCF yield also curled up to 4% in Q2 FY22, back in line with FY19 ranges. Exhibit 3. Quarterly operating trends remain resilient and continue to lift on a seasonal basis. Bottom-line fundamentals remain healthy Data : HB Insights; CHE SEC Filings However, debt also increased $6m QoQ and $130 million YoY to that amount, whereas it also recorded ~$10.5 million in stock-based compensation and long-term incentive expenses for Q2. Furthermore, it entered into a five-year $550 million amended and restated credit agreement, built of a $100 million amortizable loan and $450 million credit revolver. It has ~$387 million remaining on this facility. In addition, it bought back ~$50 million of stock and has ~$125 million remaining under its buyback plan. Hence, quarterly FCF of ~$40 million and CFFO of $56 million are less attractive on this data. However, the investment case for adding CHE into cross-asset and/or equity focused portfolios is centered around resiliency. We found that at least 76% of the CHE's quarterly market cap is explained by the 8.5% CAGR in quarterly ROIC since FY15, as seen in Exhibit 4. It printed ROIC of 33% in Q2 FY22, providing greater certainty on the predictability of its future cash flows. We argue these demonstrated return on capital and profitability characteristics are inflected onto its share price, smoothing equity return. For instance, 5-year historical standard deviation of returns is ~13% whilst 5-year beta to the benchmark is 0.51 (0.52 for 180 days). Data: Updata Meanwhile, 3-year price returns exhibit a Sortino ratio of 1.6, indicating the stability of returns. The down-shift in covariance structure is another attractive feature for portfolio inclusion, reducing equity bet on the tactical allocation side. In addition, the low-volatility of price returns will help to reduce portfolio variance and arguably acts as a hedge to volatility. Exhibit 4. Data: HB Insights, CHE SEC Filings In that vein, further evidence of this 'resiliency premium' is noted below, where gross-operating margins have wound up sequentially since FY15. With margins expanding into a weakening economic outlook is a desirable characteristic, by estimate. It provides greater headroom to absorb cost inflation and reduces any pull or drain on liquidity from the same. With an improving revenue-cost mix in both operating segments, consolidated gross margin has hit all-time high ranges in the past 2-3 quarters, as seen below. Exhibit 5. Data: HB Insights, CHE SEC Filings Portfolio backtesting Balanced portfolios with broad asset exposure continue to outperform in FY22, as seen in Exhibit 6 (portfolio 2). Chief to the defensive nature of these setups has been exposure to commodities and alternatives with a reduced weighting to equity/bonds to reduce drawdown. CHE justifies its inclusion into this kind of setup with additional budget to equity risk. From an equal weighted basis down to 2% weighting, a balanced portfolio with CHE in the equity bucket has seen a 0.54% return with 390bps drawdown since January FY22, as seen below in Portfolio 3. This has produced an alpha of ~12% relative to the benchmark with both positive Sharpe and Sortino ratios. Exhibit 6. Portfolio testing results - CHE

Shareholder Returns

CHEUS HealthcareUS Market
7D-3.4%-1.3%-2.5%
1Y-4.6%7.7%-23.2%

Return vs Industry: CHE underperformed the US Healthcare industry which returned 7.7% over the past year.

Return vs Market: CHE exceeded the US Market which returned -23.2% over the past year.

Price Volatility

Is CHE's price volatile compared to industry and market?
CHE volatility
CHE Average Weekly Movement3.3%
Healthcare Industry Average Movement7.9%
Market Average Movement6.8%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: CHE is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.

Volatility Over Time: CHE's weekly volatility (3%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
197014,137Kevin McNamarahttps://www.chemed.com

Chemed Corporation provides hospice and palliative care services to patients through a network of physicians, registered nurses, home health aides, social workers, clergy, and volunteers primarily in the United States. The company operates in two segments, VITAS and Roto-Rooter. It offers plumbing, drain cleaning, excavation, water restoration, and other related services to residential and commercial customers through company-owned branches, independent contractors, and franchisees.

Chemed Corporation Fundamentals Summary

How do Chemed's earnings and revenue compare to its market cap?
CHE fundamental statistics
Market CapUS$6.48b
Earnings (TTM)US$277.25m
Revenue (TTM)US$2.14b

23.4x

P/E Ratio

3.0x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
CHE income statement (TTM)
RevenueUS$2.14b
Cost of RevenueUS$1.35b
Gross ProfitUS$789.62m
Other ExpensesUS$512.36m
EarningsUS$277.25m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)18.68
Gross Margin36.87%
Net Profit Margin12.95%
Debt/Equity Ratio17.1%

How did CHE perform over the long term?

See historical performance and comparison

Dividends

0.3%

Current Dividend Yield

8%

Payout Ratio