AdaptHealth Corp. (AHCO): what the price requires

Generated: 2026-07-19 · Source: https://boothcheck.com/report/AHCO

Headline

Field	Value
Ticker	AHCO
Company	AdaptHealth Corp.
Current price	$10.34/sh
Composition	Net sales revenue 63% / Net revenue from fixed monthly equipment reimbursements 33% / Net revenue from capitated revenue arrangements 4%

What The Price Requires (Inversion)

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

Field	Value
Inversion basis	whole-company
Operating margin needed	1.7%
Operating margin today	5.3%
Margin compression implied	-3.6pp
Implied growth	3.6%
Multiple paid	20x operating income

The operating-margin requirement is derived from the framework's value band at year 9, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 7.4% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.7pp.

Reconcile: at the x-ray's 9.3% required return this reads ~16.6%/yr; the models below use their own rates.

How unusual the bet is: within-range

Reference	Value
vs own history	+0.03σ
cohort percentile (of 113 peers)	45
implied end-window share	0%

Valuation X-Ray

The price is supported by asset-based and relative-multiple value, while earnings-power lands below the price. A value/asset-supported name, not a pure growth bet.

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.

Family	Median price/FV	Models	Reads
Asset	0.98x	2	justifies
Earnings	13.97x	1	expensive
Relative	0.28x	2	justifies
Growth	—	0	—

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

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.2%); the inversion above states its own rate.

Per-Model Detail (n=5)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$14.65	0.71x	no	FCF base $0.2B, growth 1% (input: historical growth), terminal g 1.3%, WACC 6.2%, 5yr projection
DCF Exit Multiple	Growth	$11.52	0.90x	no	Exit EV/EBITDA: 5.2x / 7.2x / 9.2x (bear / base = today's held flat / bull), 5yr
Relative Valuation	Relative	$60.52	0.17x	yes	P/S fallback (negative EPS): Sector P/S 2.5x × TTM revenue — excluded from consensus
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$11.10	0.93x	yes	Reference only (book value floor): BV/sh $11.10, ROE negative
Two-Stage Excess Return	Asset	$9.99	1.04x	yes	Reference only (book value with convergence): BV/sh $11.10, ROE converges to ke
Discounted Future Market Cap	Growth	$6.97	1.48x	no	Rev $3.3B, growth 1% (input: historical growth; tapered), Terminal P/S: 0.4x / 0.4x / 0.5x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$0.00	—	no	Negative/zero EPS — earnings-based value floored at $0
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$6.91	1.50x	no	Normalized EBIT (5y avg op income, one-time charges added back) $0.23B × (1−21%) / WACC 6.2% → EPV (no growth)
Residual Income	Asset	—	—	no	—
Graham Number	Asset	—	—	no	—
EV/EBITDA Relative	Relative	$26.75	0.39x	yes	EBITDA $0.47B × sector EV/EBITDA 12.0x
FCF Yield	Earnings	$0.74	13.97x	yes	FCF $192.0M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF Yield	Earnings	$0.01	1034.00x	yes	SBC-adj FCF $0.17B (FCF $0.19B − SBC $0.02B) capitalized at Kₑ (excluded from median)
Ben Graham Formula	Earnings	—	—	no	—
ROIC-Justified P/B	Asset	$0.22	47.00x	yes	BV $11.10 × (ROIC 0.1% / WACC 6.2%) (excluded from median)
P/Sales Sector	Relative	$60.52	0.17x	no	Revenue $3.29B × sector P/S 2.5x
PEG Fair Value	Relative	—	—	no	—
Earnings Yield	Earnings	—	—	no	—
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$1.9b
Net debt / NOPAT (after-tax)	14.00x
Net debt / operating income (pre-tax)	11.06x
Share count CAGR (buyback)	-0.5%
Burning cash	no

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

At $9.65 the market is paying roughly 20 times operating income and embedding operating growth of about 2.8 percent a year, a pace AdaptHealth has recently delivered. The price asks for steady, not heroic, results.

The debt is the whole story on the other side. The company carries close to $1.9 billion of net debt against thin operating margins, so a small swing in reimbursement or volume moves the equity a lot.

A $1.1 billion refinancing in April 2026 extended maturities to 2031 and lowered the cost of debt, with the rate grid now tied to leverage. The deleveraging path is the swing factor between the asset support below and the earnings-power warning above.

Bull Case

Start with what the price is actually asking for, because it is more modest than the chart suggests. At $9.65 (June 27, 2026) the market is paying about 20 times company-wide operating income, which inverts to roughly 2.8 percent annual operating growth over a five-year stage. That is within what AdaptHealth has recently delivered, so the embedded assumption is not a stretch on the rate, it is a bet that the business keeps doing about what it already does. Set against the static methods, the price is supported by asset value and by a peer-multiple read, while only the earnings-power frame calls it expensive. For a company the market has treated as a broken story, the bar built into the price is low.

The operating business is steadier than the leverage implies. AdaptHealth supplies home medical equipment across sleep, respiratory, diabetes and wellness, much of it recurring through fixed monthly equipment reimbursements that make up about a third of revenue, with a small capitated contract layer on top. The company set patient census records in Sleep Health, Respiratory Health and Wellness at Home and a patient retention record in Diabetes Health, and it raised full-year 2026 revenue guidance by $10 million as revenue per member and utilization on the capitated contract tracked as expected. Recurring rental-style reimbursement plus an aging population using more home respiratory and diabetes care is a demand base that does not need a new product cycle to hold.

The capital structure is being actively repaired, which is the real bull catalyst. In April 2026 the company executed a $1.1 billion credit facility refinancing that lowered its weighted-average cost of debt, pushed maturities out to 2031, and indexed the pricing grid to its leverage ratio, so continued deleveraging mechanically lowers interest cost. Proceeds from a delayed-draw facility are earmarked to redeem the 6.125 percent senior notes due 2028 once they become callable at par in August 2026. If management converts the census and retention records into steady free cash flow and keeps paying down debt, the equity is geared to re-rate from the asset-supported floor toward the earnings the business actually produces.

Bear Case

The capital allocation history is where the caution begins. AdaptHealth was assembled through a long string of debt-funded acquisitions, and the result is close to $1.9 billion of net debt sitting on operating margins of only a couple of percent. That leverage is the dominant fact about the equity: at this debt load, a small move in reimbursement rates, payor mix or volume swings the value of the thin equity slice far more than it swings the enterprise. The company does not even report interest expense separately in a way that lets coverage be computed cleanly, so the cushion has to be inferred rather than read. The April 2026 refinancing helps the maturity wall and the rate, but it does not reduce the absolute debt; it buys time for cash generation to do that work.

The revenue base is exposed to forces the company does not control. AdaptHealth depends on government and private payors, and its own filing warns that "reimbursement claims are subject to audits by various governmental and private payor entities from time to time and such audits may negatively affect AdaptHealth's" results (FY2025 10-K, accession 0001628280-26-011213). The same filing notes 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" (same filing), a reminder that reported revenue in this model carries estimation risk. A rate cut, a competitive-bidding change, or an adverse audit can compress already-thin margins with little warning.

The price leaves a narrow path. Because the equity is so heavily geared, the modest 2.8 percent growth the price embeds has to be delivered while the company also services and reduces a large debt load. If census growth slows, if a payor tightens, or if free cash flow falls short of the deleveraging plan, the earnings-power method, which already reads the stock as expensive, becomes the relevant frame. A leveraged, low-margin, reimbursement-dependent business is precisely the kind where a single bad year does outsized damage to a thin equity stub, and the deleveraging story has to keep working quarter after quarter for the bull case to hold.

Valuation

The price decomposes as a value and asset-supported name rather than a growth bet. Asset-based and peer-multiple methods support the $9.65 quote, while the earnings-power frame reads it as expensive, reflecting the thin operating margin near a couple of percent. Inverting the current price, the market is paying about 20 times company-wide operating income, which implies operating growth of roughly 2.8 percent per year over a five-year stage. That pace is within what AdaptHealth has recently delivered, so the priced-in assumption is broadly consistent with plausible growth rather than a demanding one.

The complication is that the equity is a small slice on top of a large debt load, close to $1.9 billion net. At that leverage, the enterprise value being roughly fairly priced does not mean the equity is safe: most of the enterprise belongs to creditors, so the residual equity is highly sensitive to whether operating income holds and whether deleveraging proceeds. The reimbursement-driven revenue model also carries measurement risk, since net revenue is booked only to the extent a significant reversal is unlikely (FY2025 10-K, accession 0001628280-26-011213), which means reported earnings depend on payor outcomes the company estimates. The investment case is therefore less about the multiple and more about the trajectory of debt: the April 2026 refinancing lowered the cost of debt and extended maturities to 2031, and the rate grid now falls as leverage falls. If free cash flow steadily reduces the debt, the equity re-rates toward the operating earnings; if it does not, the same leverage that magnifies upside magnifies the downside.

Catalysts

Deleveraging is the catalyst that governs the equity. The April 2026 refinancing of $1.1 billion lowered the weighted-average cost of debt, extended maturities to 2031, and tied the pricing grid to the total leverage ratio, so every step of debt reduction lowers interest cost. The next concrete event is the planned redemption of the 6.125 percent senior notes due 2028, fundable from a delayed-draw facility once the notes are callable at par in August 2026. Watch the leverage ratio and interest expense in each quarterly report, because that is where the equity value is being created or eroded.

Operating momentum is the supporting catalyst. The company set patient census records in Sleep Health, Respiratory Health and Wellness at Home and a diabetes retention record, and it raised full-year 2026 revenue guidance by $10 million as the capitated contract tracked to plan. New CEO Suzanne Foster framed 2026 as a defining year on the first-quarter call, so execution against that guidance, and any further revisions, are the items to track. A CareFix-related transaction also appeared in recent filings and is worth monitoring for capital-allocation direction.

Reimbursement and policy are the external swing factors. Because revenue depends on government and private payors, any change to competitive bidding, Medicare rates, or audit outcomes is a direct catalyst in either direction. Quarterly results remain the main proof point on whether census growth and margin are holding while debt comes down, and a payor or rate shock is the principal downside trigger to watch.

Peer Cohorts (Per Segment, With Filing Citations)

Sleep Health / Respiratory Health / Wellness at Home (reported)

• ADUS (Addus HomeCare Corp)
• FY2025 10-K: …us-gaap:GeographicConcentrationRiskMember adus:HomeHealthSegmentMember stpr:TN 2023-01-01 2023-12-31 0001468328 us-gaap:RevenueFromContractWithCustomerSegmentBenchmarkMember us-gaap:GeographicConcentrationRiskMember adus:HomeHealthSegmentMember stpr:IL 2025-01-01 2025-12-31 0001468328…
• FY2025 10-K: …adus:HospiceSegmentMember adus:AllOtherStatesMember 2024-01-01 2024-12-31 0001468328 us-gaap:RevenueFromContractWithCustomerSegmentBenchmarkMember us-gaap:GeographicConcentrationRiskMember adus:HospiceSegmentMember adus:AllOtherStatesMember 2023-01-01 2023-12-31 0001468328…
• AVAH (Aveanna Healthcare Holdings Inc.)
• 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…
• FY2025 10-K: …following conditions: • Tracheotomies or ventilator dependence; • Dependence on continuous nutritional feeding through a "G-tube" or "NG-tube"; • Dependence on intravenous nutrition; • Oxygen-dependence in conjunction with other medical needs; and • Complex medical needs such as frequent seizures. PDN Services…
• OPCH (OPTION CARE HEALTH, INC.)
• FY2025 10-K: …and local levels places it in a strong position against existing and potential competitors. Intellectual Property Option Care Health and its subsidiaries own a variety of trademarks, licenses, and service marks, including but not limited to: "Option Care Health", "Option Care", "Critical Care Systems", "Clinical…
• FY2025 10-K: …infections in patients of all ages. The Company's anti-infective therapy and services help avoid hospitalizations for many infections that can be safely treated at home. • Nutrition Support. The Company delivers comprehensive nutrition support across pediatric, adult, and geriatric patients. The Company's expert team…

Diabetes Health (reported)

• DXCM (DEXCOM, INC.)
• FY2025 10-K: …In the future, we plan to expand our product offering to people who are pregnant and cleared/approved indications to address people with pre-diabetes, people who are obese, and people in the hospital setting. Although the majority of our revenue has been generated in the United States, we have expanded our operations…
• FY2025 10-K: …device, such as the Apple Watch and Wear OS by Google devices, when used in conjunction with the patient's or follower's compatible iPhone or Android mobile device. Data and Insulin Delivery Collaborations We have entered into multiple collaboration agreements that leverage our technology platform to integrate our…
• PODD (INSULET CORPORATION)
• FY2025 10-K: …or new generations of existing products, they may be quickly rendered obsolete by changing customer preferences, changing industry or regulatory standards, or competitors' innovations. Our failure to introduce commercially successful new and innovative products in a timely manner could have a material adverse effect…
• FY2025 10-K: …from MDI. Our distributors have also implemented virtual training programs. Customer Support We seek to provide our customers with high quality customer support, from product ordering to insurance investigation, order fulfillment, and ongoing support. Our customer support systems are integrated with our sales,…
• TNDM (Tandem Diabetes Care, Inc.)
• FY2025 10-K: …a new pump. These enhancements generally include new developments in our AID technology, CGM integrations and mobile app features. For more than a decade we have offered our customers, their caregivers and healthcare providers a data management application to provide a fast, easy and visual way to display diabetes…
• FY2025 10-K: …customer service and clinical resources; • greater ability to respond to competitive pressures, regulatory uncertainty, or challenges within the financial markets; • established relationships with healthcare providers, third-party payors and regulatory agencies; • established reputation and name recognition among…

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.
• 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.