Addus HomeCare Corp (ADUS): what the price assumes

In the published model solve dated 2026-Q2, anchored at $118.76, Addus HomeCare Corp (ADUS) is priced for +5.3% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/ADUS

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

The operating-margin figure is value-band context at year 9: derived from the framework's value band, a separate calculation — not part of the priced-in solve.

Solve inputs: computed at a 8.6% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.8%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Bullet Takeaways

• Personal care is 77% of revenue and one state pays for a large share of it: the FY2025 10-K reports "operations in Illinois, which represented 42.1 % and 51.5% of our net service revenues for the years ended December 31, 2025 and 2024, respectively", with the Illinois Department on Aging alone at 18.1% last year.

• The same government that sets the price also sets the biggest cost, since the Illinois rate increase to $30.80 an hour effective January 1, 2026 came attached to a minimum wage of $18.75 for direct service workers, and Addus keeps the spread between them.

• Second-quarter results are released after the close on August 3, 2026, with the call the next morning, and the first quarter came in below consensus on both revenue and earnings, so the bar is a recovery rather than a repeat.

Bull Case

The objection to owning this company fits in one sentence: it is a line item in a state budget. Personal care is 77% of revenue, most of it paid by Medicaid programmes, and the 10-K does not soften the concentration: "operations in Illinois, which represented 42.1 % and 51.5% of our net service revenues for the years ended December 31, 2025 and 2024, respectively. One payor client, the Illinois Department on Aging, accounted for 18.1 % and 21.0% of net service revenues". A single legislature deciding to save money is the whole bear case in one move. What the record shows is that the legislature has been moving the other way, and for a reason that is not political generosity.

The mechanism is worth spelling out because it is unusual. Illinois does not just set what Addus is paid; it sets what Addus must pay. The 10-K records a rate of $29.63 an hour effective January 1, 2025 that "required a minimum wage of $18.00 per hour for direct service workers", and then a further step, with the fiscal 2026 state budget including "an increase in hourly rates for in-home care services to $30.80, effective January 1, 2026. This rate sustains a minimum wage of $18.75 per hour" for those same workers. The state raises the reimbursement and the wage floor together. That is an unglamorous arrangement, and it is also a hedge: the largest cost in the business moves with the largest revenue line by legislative design rather than by negotiation.

It has been showing up in the numbers. "Gross profit, expressed as a percentage of net service revenues, increased from 47.0% for the year ended December 31, 2024 to 48.7% for the year ended December 31, 2025". Nearly two points of gross profit in a labour business where wages are the cost of goods sold is not a small move, and it happened in a year the same filing describes as difficult on the cost side.

Why the state keeps paying is the more durable part of the argument. An hour of care in someone's home is cheaper than a day in a facility, and the demographics pushing demand are not sensitive to sentiment. That shows in the segment mix rather than in a forecast: Addus is 77% personal care, 18% hospice and 5% home health, and the parts of the business connected to keeping people out of institutions are the parts that grew.

The trailing economics land in a defensible spot within the cohort rather than at an extreme. Addus converts 9.2% of revenue into operating profit on about $1.45B of trailing sales. Aveanna (AVAH) converts 10.9% on $2.52B while growing 20.5%, and Chemed (CHE), the closest listed hospice comparison, 12.9% on $2.54B while growing 2.1%. At the weaker end, AdaptHealth (AHCO) manages 2.2% on $3.29B and Brookdale (BKD) 1.1% on $3.15B with revenue slightly down. Addus is neither the cheapest operator nor the most profitable, but it is one of the few in this group growing and earning at the same time, and it does so with operating profit covering interest about 10 times over and without consuming cash.

Bear Case

Federal policy is the variable with the most leverage here, and it moved last year. The 10-K states that budget reconciliation legislation enacted on July 4, 2025 "is expected to decrease federal Medicaid spending, including as a result of changes to Medicaid eligibility policies and changes to Medicaid financing mechanisms, such as limitations on provider tax arrangements". Provider taxes are how many states manufacture the share of Medicaid spending that draws down federal matching funds. Restrict them and a state's capacity to fund home care shrinks without any legislator voting to cut home care. The pressure arrives one budget cycle later, through a rate that does not rise rather than a programme that gets cancelled, which is much harder for a company to protest and much easier for a market to underestimate.

Concentration turns that general risk into a specific one. Illinois was 42.1% of net service revenues last year and its Department on Aging alone 18.1%, and the risk factors carry the matching warning that "Future efforts to reduce the costs of the Illinois Department on Aging programs could adversely affect our service revenues and profitability." A company with a fifth of its revenue from one government agency does not have customers in the ordinary sense. It has an appropriation.

The price does not obviously reflect that. At roughly 17 times company-wide operating income, the multiple sits at the very top of the peer distribution, well past the upper quartile, for a business whose largest payor is a state facing the same federal squeeze as every other state. The growth the price requires, about 6.9% a year at the operating line, is not itself demanding and sits inside what Addus has recently delivered. The demand is that it continue without a year of flat reimbursement, and reimbursement is the one input management does not set. The arithmetic amplifies the point: each additional percentage point of required return moves the growth the price needs by roughly 6.5 points, so a change in how the market prices policy risk does far more damage here than a change in operations would.

Look at the capital and the picture gets harder. Addus has built itself by acquisition, and the balance sheet shows it: book value is about $60.38 a share, but return on invested capital runs near 2.3% and return on equity around 8.9%, which is below the roughly 9.3% cost of equity applied to a business like this. That combination is what a serial acquirer looks like when the prices paid have been full. It also explains why the approaches anchored on capital and on realised profit sit so far under today's level: the price stands about 100% above where the asset value methods land and about 69% above the earnings power methods. The share count has grown about 3.5% a year over the four years to March 2026, which is part of how the acquisitions were paid for.

Wage economics cut both ways and the filing says so. Management notes that rate increases "may not be sufficient to offset increases to operating expenses", and adds that these factors "had an unfavorable impact on our financial results during the year ended December 31, 2025". The reimbursement-and-wage-floor pairing that protects the spread in a good year offers no protection when a state raises the wage without raising the rate, and nothing obliges it to do both.

The bull answer is that home care is cheaper than institutional care and that states know it. That is true and it is why the business exists. It does not follow that the rate rises every year, and the peer set shows what happens to operators whose reimbursement stalls: AdaptHealth (AHCO) converts 2.2% of $3.29B into operating profit with revenue up 1.2%, and Brookdale (BKD) 1.1% of $3.15B with revenue slightly lower. Neither of those companies decided to become less profitable. Their payors decided for them.

Valuation

Begin with the demand $114.62 places on the business. The price capitalises company-wide operating income at roughly 17 times, and holding that requires operating profit to compound about 6.9% a year through a five-year stage before settling at a 4% long-run pace, discounted at a cost of capital near 8.6%. Measured against what Addus has recently delivered, that rate is unremarkable. The awkward part is where the multiple sits relative to the companies it is measured against: at the very top of the peer distribution, well past the upper quartile, in an industry where nobody else is being paid that way.

Those two observations are not in conflict; they are describing different things. The growth being asked for is ordinary. The willingness to pay 17 times for it in home care is not. Which one turns out to matter depends on whether reimbursement stays orderly, and that is a policy question rather than an operating one.

The methods sort accordingly. Peer multiple approaches land about 8% above the price and the forward cash-flow methods about 7% above it, so on both of those readings today's level is roughly fair. The asset value methods sit far below, with the price about 100% above where they land, and the earnings power methods about 69% above. The last group deserves an explanation rather than a shrug. One of them normalises operating profit across five years, adds back one-time charges and capitalises the result with no growth at all. Averaging across five years for a company that has been buying businesses throughout means the normalised figure reflects a smaller Addus than the one that exists now. It reads low for a structural reason, but it also measures something the growth methods do not: what the price would look like if acquisitions stopped.

Two filing-reported inputs carry the operating side of the calculation. The first is conversion, which has been improving: "Gross profit, expressed as a percentage of net service revenues, increased from 47.0% for the year ended December 31, 2024 to 48.7% for the year ended December 31, 2025". The second is the price and cost of an hour of care, both set in the same document. Illinois moved to "an increase in hourly rates for in-home care services to $30.80, effective January 1, 2026. This rate sustains a minimum wage of $18.75 per hour" for direct service workers. Revenue per hour and cost per hour are therefore both legislated, and the difference between them is the margin the model is extrapolating.

Cohort position is where the multiple looks most exposed. Addus converts 9.2% of about $1.45B of revenue into operating profit. Chemed (CHE) converts 12.9% of $2.54B, Aveanna (AVAH) 10.9% of $2.52B while growing 20.5%, and Encompass Health (EHC) carries a 10.0% profit margin on $6.06B. Addus is not the standout operator in that group on either growth or conversion, which makes a top-of-distribution multiple a statement about expected policy stability rather than about demonstrated performance.

The balance sheet is not the risk. Funded borrowings are small next to a year of operating profit, that profit covers interest about 10 times over, and the business generates cash rather than consuming it. What the balance sheet does reveal is how the company grows: the share count has risen about 3.5% a year over the four years to March 2026, and return on invested capital of roughly 2.3% against book value of about $60.38 per share is the arithmetic of buying revenue rather than building it. That is the trade a holder is making at this multiple.

Catalysts

The next dated event is close and the bar is a recovery rather than a repeat. Addus releases second-quarter results after the close on Monday, August 3, 2026, with the conference call the following morning.

The first quarter is why that matters. Net service revenues rose 7.7% to $363.6 million and diluted earnings per share came to $1.36 against $1.16 a year earlier, but both figures landed below what analysts had been carrying, with the revenue estimate at $373.5 million and the per-share estimate at $1.58. Growth continued; it simply did not arrive at the pace the market had assumed. Underneath the headline, personal care rose 8.8% to $281.1 million with organic growth of 6.5%, hospice rose 7.1% to $65.8 million, and home health fell 7.0% to $16.7 million.

That mix is the thing to watch in August. Home health is the smallest segment and the only one contracting, so it changes little by itself, but the split between organic and acquired growth in personal care changes a great deal. Organic growth of 6.5% against total segment growth of 8.8% means roughly a quarter of the increase came from businesses that were bought rather than built, and the multiple being paid for the company rests on the first number continuing. The other line worth reading is any commentary on state rate schedules for the coming fiscal year, since the federal Medicaid changes enacted in July 2025 work through state budgets with a lag and the second half of 2026 is when those budgets get written.

Peer Cohorts (Per Segment, With Filing Citations)

Personal Care (reported)

• AVAH (Aveanna Healthcare Holdings Inc.)
• FY2025 10-K: …to patients including private duty nursing and therapy services, (ii) adult home health and hospice services (collectively "patient revenue"); and (iii) from the delivery of enteral nutrition and other products to patients ("product revenue"). The services provided by the Company have no fixed duration and can be…
• FY2025 10-K: …Duty Services ("PDS"); Home Health & Hospice ("HHH"); and Medical Solutions ("MS"). This presentation aligns our financial reporting with the manner in which we manage our business operations, with a focus on the strategic allocation of resources and separate branding strategies between the business divisions.…
• AHCO (AdaptHealth Corp.)
• FY2025 10-K: …of sensitive personal information, such as protected health information could cause a loss of confidential data, give rise to remediation and other expenses, expose us to liability under applicable laws and regulations, including the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), consumer…
• FY2025 10-K: …policies and procedures with respect to protected health information that is used or disclosed. The HITECH Act includes notification requirements for breaches of patient-identifiable health information, restricts certain disclosures and sales of patient-identifiable health information and provides a tiered system for…
• BKD (BROOKDALE SENIOR LIVING INC.)
• FY2025 10-K: …areas of compensation, leadership, career growth, and meaningful work. • Earn resident and family trust and satisfaction by providing valued, high-quality care and personalized service. We believe that fostering the continued trust of our residents and their families will allow us to build relationships that create…
• FY2025 10-K: …their changing needs. Assisted Living and Memory Care. The Company's Assisted Living and Memory Care segment includes owned or leased communities that offer housing and 24-hour assistance with activities of daily living for the Company's residents. The Company's assisted living and memory care communities include…
• EHC (Encompass Health Corporation)
• FY2025 10-K: $2,190,000 for multiple identical violations in a single calendar year depending on an entity's level of culpability. Importantly, HHS-OCR has indicated that the failure to conduct a security risk assessment or adequately implement HIPAA compliance policies could qualify as willful neglect. In addition, there are…
• FY2025 10-K: …expense includes all costs associated with supplies used while providing patient care. Specifically, these costs include personal protective equipment ("PPE"), pharmaceuticals, food, syringes, bandages, and other similar items. S upplies increased during 2025 compared to 2024 primarily due to higher costs resulting…

Hospice (reported)

• CHE (CHEMED CORPORATION)
• FY2025 10-K: …to settlements of audits and reviews, as well as certain hospice-specific revenue capitations. Amounts are generally billed monthly or subsequent to patient discharge. Subsequent changes in the transaction price initially recognized are not significant. Hospice services are provided on a daily basis and the type of…
• FY2025 10-K: …to hospices will not decrease. Reductions in amounts paid by government programs for services or changes in methods or regulations governing payments could cause VITAS' net patient service revenue and profits to materially decline. 15% to 20% of VITAS' days of care are provided to patients who reside in nursing…
• AVAH (Aveanna Healthcare Holdings Inc.)
• FY2025 10-K: …services and durable medical equipment, some of which may have greater financial and other resources and may be more established in their respective communities. Competing companies may offer newer or different services from those offered by us and may thereby attract customers who are presently receiving our home…
• FY2025 10-K: …can help our patients recover after a hospitalization or surgery and assist patients in managing chronic illnesses. We also help our patients manage their medications. Through our care, we help our patients recover more fully in the comfort of their own homes, while remaining as independent as possible. HH Services…
• AHCO (AdaptHealth Corp.)
• FY2025 10-K: …price, such that net revenue is recorded only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in the future. If actual amounts of consideration ultimately received differ from the Company's estimates, the Company adjusts these estimates,…
• FY2025 10-K: …necessity determinations. AdaptHealth cannot currently predict the adverse impact these measures might have on its financial condition and results of operations, but such impact could be material. Federal and state budgetary and other cost-containment pressures will continue to impact the home respiratory care…
• EHC (Encompass Health Corporation)
• FY2025 10-K: …by CMS causing the facility to be paid under the acute-care payment system which would result in reduced reimbursement per discharge. If one or more of our hospitals fails to demonstrate compliance with the 60% Rule and CMS re-classifies it as an acute-care hospital, our revenue and profitability may be materially…
• FY2025 10-K: …to repurchase shares. • We may be unable or unwilling to continue to declare and pay dividends on our common stock. The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on…

Home Health (reported)

• AVAH (Aveanna Healthcare Holdings Inc.)
• FY2025 10-K: …Episodic Admissions Home health total admissions represents the number of new patients who have begun receiving services. We review the number of home health admissions on a daily basis as we believe it is a leading indicator of our growth. We measure home health admissions by reimbursement structure, separating them…
• FY2025 10-K: …wage, this has not historically been a source of risk to our margins, as our non-clinical reimbursement rates generally have mechanisms to adjust commensurate with state and local changes in applicable minimum wages. Pediatric Therapy We provide physical, occupational and speech therapy services to assist pediatric…
• AHCO (AdaptHealth Corp.)
• FY2025 10-K: …respiratory failure. Diabetes Health The Diabetes Health segment provides medical devices, including continuous glucose monitors and insulin pumps, and related services to patients for the treatment of diabetes. Wellness at Home The Wellness at Home segment provides home medical equipment and services to patients in…
• FY2025 10-K: …due to a shift in payor mix from commercial insurance to government payors, partially offset by growth in patient census for insulin pumps and supplies. Adjusted EBITDA Adjusted EBITDA from the Diabetes Health segment decreased by $34.5 million, or 56.9%, for the year ended December 31, 2025 compared to the year…
• EHC (Encompass Health Corporation)
• FY2025 10-K: …and may include exclusion from federal health care programs such as Medicare and Medicaid. The penalties are adjusted annually to account for inflation. Sanctions under this law are in addition to the other statutory remedies discussed above. Available Information We make available through our website,…
• FY2025 10-K: …a monetary reward for providing information on Medicare fraud and abuse that leads to the recovery of Medicare funds. Penalties for violations of HIPAA include civil and criminal monetary penalties. The United States Department of Health and Human Services Office of Civil Rights ("HHS-OCR") implemented a permanent…
• CHE (CHEMED CORPORATION)
• FY2025 10-K: …for a short period for pain control or symptom management which cannot be managed in other settings. General inpatient care services must be provided in a Medicare or Medicaid certified hospital or long-term care facility or at a freestanding inpatient hospice facility with the required registered nurse staffing.…
• FY2025 10-K: …General Inpatient Care occurs when a patient requires services in a controlled setting for a short period of time for pain control or symptom management which cannot be managed in other settings. General inpatient care services must be provided in a Medicare or Medicaid certified hospital or long-term care facility…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.