CHEMED CORPORATION (CHE): what the price requires
At today's price, CHEMED CORPORATION (CHE) is priced for +7.6% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/CHE
Headline
| Field | Value |
|---|---|
| Ticker | CHE |
| Company | CHEMED CORPORATION |
| Current price | $494.21/sh |
| Composition | VITAS 64% / Roto-Rooter 36% |
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 | 6.8% |
| Operating margin today | 12.6% |
| Margin compression implied | -5.8pp |
| Implied growth | 7.6% |
| Multiple paid | 21x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.5pp.
Reconcile: at the x-ray's 9.3% required return this reads ~18.1%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.15σ |
| cohort percentile (of 112 peers) | 47 |
| implied end-window share | 0% |
Valuation X-Ray
Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.
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 | 2.41x | 5 | expensive |
| Earnings | 2.50x | 3 | expensive |
| Relative | 1.46x | 3 | expensive |
| Growth | 1.46x | 3 | expensive |
Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.9%); the inversion above states its own rate.
Per-Model Detail (n=14)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $339.35 | 1.46x | yes | FCF base $0.4B, growth 2% (input: historical growth), terminal g 2.1%, WACC 8.9%, 5yr projection |
| DCF Exit Multiple | Growth | $419.05 | 1.18x | yes | Exit EV/EBITDA: 15.7x / 17.7x / 19.7x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $338.96 | 1.46x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 15.1x / 18.0x / 20.9x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $205.15 | 2.41x | yes | BV/sh $61.94, ROE (TTM) 30.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $386.82 | 1.28x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $319.74 | 1.55x | yes | Rev $2.5B, growth 2% (input: historical growth; tapered), Terminal P/S: 2.2x / 2.7x / 3.1x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $182.43 | 2.71x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.35B × (1−25%) / WACC 8.9% → EPV (no growth) |
| Residual Income | Asset | $313.81 | 1.57x | yes | BV $61.94 + 5yr PV of (ROE (TTM) 30.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $159.79 | 3.09x | yes | √(22.5 × EPS $18.32 × BVPS $61.94) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $329.08 | 1.50x | yes | EBITDA $0.39B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $264.92 | 1.87x | yes | FCF $355.8M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $15.35 | 32.20x | yes | EPS $18.32 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $40.94 | 12.07x | yes | BV $61.94 × (ROIC 5.9% / WACC 8.9%) |
| P/Sales Sector | Relative | $463.94 | 1.07x | yes | Revenue $2.54B × sector P/S 2.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $198.05 | 2.50x | yes | EPS $18.32 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $74.3m |
| Net debt / NOPAT (after-tax) | 0.31x |
| Net debt / operating income (pre-tax) | 0.23x |
| Interest coverage | 185.0x |
| Share count CAGR (buyback) | -2.6% |
| Burning cash | no |
Bullet Takeaways
- At $436.52 the price clears every standard valuation frame at once. The earnings-power view lands near $183, the asset-based excess-return view near $205, the peer multiples around $329 to $339, and the most generous forward-growth read near $382. Buying here means underwriting an outcome that sits above all of them.
- The two halves of Chemed pull in opposite directions right now. VITAS grew days-of-care 14.1% and carried a roughly 2.8% Medicare rate increase, while Roto-Rooter saw revenue decline and management cut its 2026 margin guidance, pointing to higher paid digital lead costs.
- The balance sheet is not the question here. Interest coverage runs near 170x, net debt to operating income is about 0.23x, and returns on equity sit above 30%. The debate is entirely about price versus durable earnings, not about survival.
Bull Case
The market is paying $436.52 for Chemed, and the cleanest way to see what that buys is to invert it. At today's price the business needs only about 4.5% operating-income growth sustained over a normal horizon to justify the quote, against a current operating margin near 12.9%. That is not a heroic number. The reverse-DCF implied bet sits within the range of what a steady, cash-generative healthcare-plus-services compounder has delivered, and the company's own profitability backs it up: trailing return on equity above 30% and interest coverage near 170x describe a business that converts revenue into cash without strain.
The fundamentals underneath that price are moving in the right direction at the larger segment. VITAS reported a 14.1% increase in days-of-care and a geographically weighted Medicare reimbursement rate increase of roughly 2.8% (FY2025 10-K, accession 0001562762-26-000020). The April quarter delivered $5.65 of adjusted EPS against a $5.39 consensus, and management raised full-year 2026 guidance to a range of $23.25 to $24.25 per diluted share, with VITAS specifically raising its revenue and average-daily-census growth outlook. Hospice demand is demographic, not cyclical, and Chemed's largest business is taking share of days-of-care while the reimbursement backdrop holds.
The asset and excess-return models are the ones to weigh most carefully because they argue the price is not absurd given how productive the equity is. The two-stage excess-return view lands at $386.82, the discounted future market-cap view at $282.42, and the relative and EV/EBITDA peer frames cluster around $329 to $339. A buyer who believes VITAS sustains mid-single-digit growth and Roto-Rooter stabilizes is underwriting a gap to the peer-multiple range, not to a fantasy. With net debt at roughly a quarter of one year's operating income, the company also has room to keep buying back stock, and the share count has been shrinking at about 2.6% a year.
Bear Case
Start with where the cash is going, because that is where the optimism leaks. Chemed pays a dividend that yields only about 0.5%, below the threshold where dividend models even apply, so the return-of-capital story rests almost entirely on buybacks. Those buybacks are happening at a price that sits above every valuation family at once. The price-to-earnings-power ratio is 2.2x, the price to the simple excess-return value is 2.13x, and the Graham number sits at $159.79 against a $436.52 (June 27, 2026) quote. Repurchasing stock at more than two times earnings power is capital allocation that only works if the growth assumption embedded in the price is right, and the bear case is that it is not.
The smaller engine is sputtering in a way that looks partly structural. Roto-Rooter revenue declined and management reduced its 2026 margin guidance, attributing the compression to higher paid digital lead costs. That is not a weather problem or a one-quarter mix issue. Roto-Rooter sells plumbing, drain cleaning, excavation and water restoration through company-owned branches, independent contractors and franchisees (FY2025 10-K, accession 0001562762-26-000020), and the unit's edge has long been brand and lead flow. When the cost of buying a customer rises and stays risen, the margin profile of the whole non-hospice half of the company resets lower, and that erosion is exactly what the conservative models are flagging.
VITAS carries its own ceiling. Hospice revenue is governed by the Medicare cap, and the filing is explicit that reductions in government payments or changes in payment methods could cause VITAS net patient service revenue and profits to materially decline (FY2025 10-K, accession 0001562762-26-000020). Between 15% and 20% of VITAS days of care are provided to patients residing in nursing homes (FY2025 10-K, accession 0001562762-26-000020), a channel exposed to its own reimbursement and occupancy pressures. A business whose growth depends on a single payer holding rates steady, while its other half resets margins lower, is a thin reed for a price that already assumes everything goes right.
Valuation
The valuation X-ray for Chemed is unusually one-directional: not a single family of methods reaches the current $436.52. Asset-based approaches land lowest, with the simple excess-return model at $205.15 and residual income at $313.81. Earnings-power frames sit even lower in places, with earnings power value at $183.30 and the FCF-yield capitalization at $264.92. The peer-multiple family clusters in the low $300s, relative valuation at $338.96 and EV/EBITDA relative at $329.08. Only the forward-growth methods climb near the price, the DCF exit-multiple read at $381.83 and the two-stage excess-return view at $386.82, and even those fall short.
That pattern is the signal. When asset, earnings, and peer frames all sit below the quote and only the most growth-optimistic methods approach it, the price is making a bet on durability rather than on current economics. The reverse-DCF puts numbers on that bet: roughly 4.5% implied operating-income growth, which the model reads as within the company's own historical range rather than an outlier.
The honest read is that Chemed is a high-quality business priced for its quality. Trailing return on equity above 30% and a P/Sales-sector read of $463.94 (the one method that actually exceeds the price) say the market is willing to pay a premium for the cash conversion. The question a buyer answers at $436.52 is whether VITAS census growth and Roto-Rooter stabilization together clear the mid-single-digit hurdle the price requires. If they do, the peer-multiple gap closes upward. If Roto-Rooter's margin reset proves structural, the conservative methods in the low $300s are the more honest anchor.
Catalysts
The April 23 quarter set the near-term tone: adjusted EPS of $5.65 beat the $5.39 consensus, and management issued full-year 2026 guidance of $23.25 to $24.25 per diluted share. Management flagged that roughly 55% of adjusted net income and EBITDA is expected in the second half of 2026, so the next two quarterly prints carry weight in confirming the back-half-weighted path.
The two segments give investors distinct things to watch. At VITAS, the live catalyst is admissions mix and average-daily-census growth, both of which management raised guidance on; continued days-of-care gains near the 14% pace would validate the bull read. At Roto-Rooter, the catalyst leans negative: management cut 2026 margin guidance and tied it to higher paid digital lead costs, so each quarter is a test of whether that compression stabilizes or keeps widening. Watch also for the cadence of share repurchases, since buybacks are the primary return-of-capital lever and their pace signals how management views the stock at current levels.
Peer Cohorts (Per Segment, With Filing Citations)
VITAS (reported)
- ADUS (Addus HomeCare Corp)
- (no filing in the citation store)
- AVAH (Aveanna Healthcare Holdings Inc.)
- (no filing in the citation store)
- OPCH (OPTION CARE HEALTH, INC.)
- (no filing in the citation store)
- ENSG (ENSIGN GROUP, INC)
- (no filing in the citation store)
- NHC (NATIONAL HEALTHCARE CORP)
- (no filing in the citation store)
- AHCO (AdaptHealth Corp.)
- (no filing in the citation store)
Roto-Rooter (reported)
- FTDR (Frontdoor, Inc.)
- (no filing in the citation store)
- ROL (ROLLINS INC)
- (no filing in the citation store)
- ABM (ABM INDUSTRIES INCORPORATED)
- (no filing in the citation store)
- CLH (CLEAN HARBORS, INC)
- (no filing in the citation store)
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.