Chemed Corporation
CHE
$501.45
-1.65%
Chemed Corporation is a diversified healthcare and services holding company that operates two distinct segments: VITAS, which provides hospice and palliative care services to terminally ill patients through a network of physicians, nurses, aides, and social workers, and Roto-Rooter, which delivers plumbing, drain cleaning, and water restoration services to residential and commercial customers. VITAS is the larger segment, generating roughly 65% of revenue, and positions Chemed as one of the largest hospice providers in the United States, while Roto-Rooter gives the company a countercyclical, cash-generative consumer services arm that is a recognized national brand in a highly fragmented industry. The current investor narrative centers on the durability of VITAS's Medicare-funded hospice volumes amid reimbursement and labor-cost pressures, the margin recovery trajectory after a soft 2025, and the company's aggressive capital return program — the board authorized an additional $300 million for stock repurchases in February 2026 alongside a $0.60 quarterly dividend, even as the stock traded down over the prior year. Recent headlines highlight both a major fund building a $5.56 million stake on the thesis of a cash-rich business and expectations for dividend growth, framing Chemed as a defensive, cash-flow-compounding healthcare name rather than a high-growth story.…
CHE
Chemed Corporation
$501.45
Related headlines
Investment Opinion: Should I buy CHE Today?
We rate Chemed a Hold. The company's strong cash generation, low leverage, and defensive characteristics are offset by stalled revenue growth and significant margin compression, creating a balanced risk/reward at the current price of $507.50. The analyst consensus rating of 'buy' with an average target of $571.60 implies 12.6% upside, but recent downgrades from RBC and Jefferies suggest limited near-term catalysts.
The supporting evidence for a Hold is mixed. On the positive side, Chemed trades at a forward PE of 18.4x, near the low end of its historical range, and generates $325.5 million in trailing free cash flow with a 27.1% ROE. The dividend payout ratio of 11.9% leaves ample room for growth, and the $300 million buyback authorization underscores management's confidence. However, revenue growth has stalled at -0.1% year-over-year in Q4 2025, and gross margin has compressed from 36.6% to 32.2% over the past year, raising concerns about the durability of earnings.
The biggest risks that could invalidate the Hold rating include a continued decline in VITAS margins, Medicare reimbursement cuts, and a failure to reaccelerate revenue growth. We would upgrade to Buy if gross margins stabilize above 33% and revenue growth returns to mid-single digits, or if the stock pulls back to the $450–$470 range, improving the risk/reward. We would downgrade to Sell if gross margins fall below 30% or if Medicare announces significant reimbursement cuts. Relative to its history and peers, Chemed appears fairly valued, with the forward PE of 18.4x reflecting tempered expectations but not deep pessimism.
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CHE 12-Month Price Forecast
Chemed presents a balanced risk/reward at current levels. The stock's defensive characteristics, strong cash generation, and low leverage are offset by stalled revenue growth and significant margin compression. The forward PE of 18.4x suggests the market is pricing in a modest earnings recovery, but the recent downgrades from RBC and Jefferies indicate that some analysts see limited near-term upside. We would upgrade to bullish if gross margins stabilize above 33% and revenue growth returns to mid-single digits, or if the stock pulls back to the $450–$470 range. We would downgrade to bearish if gross margins fall below 30% or if Medicare announces significant reimbursement cuts.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Chemed Corporation's 12-month outlook, with a consensus price target around $571.60 and implied upside of +14.0% versus the current price.
Average Target
$571.60
0 analysts
Implied Upside
+14.0%
vs. current price
Analyst Count
—
covering this stock
Price Range
$520 - $650
Analyst target range
Five analysts cover Chemed with a consensus recommendation of "buy" (mean rating of 2.2 on a scale where lower is more bullish), and the average price target of $571.60 implies roughly 12.6% upside from the current price of $507.50. The distribution of recent institutional ratings leans constructive but is not uniformly bullish: Oppenheimer maintains Outperform, B of A Securities reiterates Buy, while RBC Capital downgraded to Sector Perform from Outperform in February 2026 and Jefferies moved to Hold from Buy in January 2026. That mixed tape — two bullish holds and two notable downgrades — suggests the sell-side is bifurcated between those who see the margin pressure as temporary and those who view the risk/reward as balanced after the stock's run. The consensus is best characterized as moderately bullish, with the average target reflecting confidence in the cash-flow story but the recent downgrades tempering conviction. The target range spans $520 to $650, a spread of $130, or roughly 25% of the current price, which signals meaningful disagreement about the company's trajectory. The high target of $650 implies about 28% upside and would require either a re-rating of the multiple toward the upper end of its historical PE band or a sharper-than-expected earnings recovery driven by VITAS margin normalization and continued buyback accretion. The low target of $520, just 2.5% above the current price, effectively prices in a scenario where margin compression persists, hospice reimbursement remains pressured, and the stock simply holds its ground. The wide spread, combined with the recent downgrades from RBC and Jefferies, indicates elevated uncertainty and suggests investors should weigh the risk of further estimate revisions against the defensive, cash-generative characteristics that underpin the bull case.
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Bulls vs Bears: CHE Investment Factors
The bull case rests on Chemed's robust cash generation, low leverage, and defensive characteristics, with a forward PE of 18.4x that appears undemanding relative to its historical range. The bear case centers on stalled revenue growth, significant margin compression, and recent analyst downgrades that highlight uncertainty around the margin recovery trajectory. Currently, the bear evidence carries more weight because the margin deterioration is concrete and recent, while the bull case relies on a reacceleration that has yet to materialize. The single most important tension is whether the gross margin compression in VITAS is transitory or structural; if it proves transitory, the stock could re-rate toward the high end of its historical PE band, but if it persists, further downside is likely.
Bullish
- Strong cash generation and low leverage: Chemed generated $325.5 million in trailing free cash flow and $117.2 million in Q4 2025 alone, comfortably covering its $8.5 million quarterly dividend and $174.6 million in buybacks. With debt-to-equity of just 0.158 and interest coverage above 190x, the balance sheet poses minimal financial risk.
- Undemanding forward valuation: At a forward PE of 18.4x versus a trailing PE of 23.2x, the stock trades near the low end of its historical 19.5x–38.2x PE range. This suggests the market is pricing in tempered expectations, leaving room for multiple expansion if earnings recover as analysts project.
- Defensive, low-beta profile: With a beta of 0.506, Chemed moves at roughly half the market's volatility, making it an attractive defensive holding in uncertain markets. Its hospice and plumbing services are non-discretionary, providing revenue stability across economic cycles.
- Analyst consensus sees upside: Five analysts rate the stock a 'buy' with an average target of $571.60, implying 12.6% upside from the current $507.50. The high target of $650 suggests 28% upside if margin recovery materializes.
Bearish
- Revenue growth has stalled: Q4 2025 revenue of $639.3 million was flat year-over-year at -0.1%, following low-single-digit sequential growth. The lack of top-line momentum raises questions about VITAS census growth and Roto-Rooter pricing power.
- Margin compression is significant: Q4 2025 gross margin fell to 32.2% from 36.6% a year earlier, and net margin dropped to 12.0% from 14.1%. The quarterly gross margin path through 2025 (33.5%, 29.8%, 28.9%, 32.2%) shows a downward bias versus 2024's 34.6%–36.6% range.
- Recent analyst downgrades: RBC Capital downgraded to Sector Perform in February 2026 and Jefferies moved to Hold in January 2026, citing balanced risk/reward after the stock's run. This bifurcation in sell-side opinion signals uncertainty about the margin recovery timeline.
- Premium valuation versus peers: The trailing PE of 23.2x and EV/EBITDA of 14.8x sit at a premium to typical medical-care-facilities valuations. If margin pressure persists, the stock could de-rate toward the sector average.
CHE Technical Analysis
Chemed is in a sustained, well-defined uptrend that has carried the shares 14.81% higher over the trailing year and 19.75% year-to-date, with the current price of $507.50 sitting at roughly 72% of the 52-week range between the $365.21 low and $557.00 high. That positioning — well above the midpoint but not pinned to the high — suggests the stock retains momentum without being maximally extended, leaving room to run toward the prior peak. The 6-month gain of 33.34% versus the S&P 500's 17.35% (relative strength of +15.99) confirms Chemed has been a meaningful outperformer over the intermediate term, though the more recent 1-year relative strength of -0.20 shows it has merely matched the market over twelve months, implying most of the outperformance was front-loaded. Short-term momentum has cooled: the 1-month change of -3.15% lags the S&P 500's +0.59% by 3.74 points, while the 3-month change of +3.64% roughly matches the index's +3.34%. This divergence — a strong 6-month and YTD trend against a negative 1-month print — signals a healthy consolidation or mild mean-reversion pullback within a broader uptrend rather than a trend reversal, especially given the stock's low beta of 0.506, which means it moves with roughly half the market's volatility and is unlikely to suffer sharp drawdowns. Key technical support sits at the 52-week low of $365.21, with a more immediate floor around the $495–$500 area where the stock has repeatedly found buyers in September; resistance is defined by the 52-week high of $557.00. A breakout above $557 would confirm trend continuation and likely open the door to new highs, while a breakdown below $495 would put the 200-day trend and the $365 low in play. The maximum drawdown of -22.98% over the period shows the stock can correct meaningfully when sentiment shifts, but the 0.506 beta argues for smaller position-sizing adjustments than a high-beta name would require, and the low short ratio of 4.79 days indicates no meaningful bearish crowding.
Beta
0.51
0.51x market volatility
Max Drawdown
-23.0%
Largest decline past year
52-Week Range
$365-$557
Price range past year
Annual Return
+15.0%
Cumulative gain past year
| Period | CHE Return | S&P 500 |
|---|---|---|
| 1m | -3.5% | +0.9% |
| 3m | +2.2% | +3.4% |
| 6m | +30.0% | +14.4% |
| 1y | +15.0% | +16.2% |
| ytd | +18.3% | +14.0% |
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CHE Fundamental Analysis
Chemed's revenue trajectory has flattened after years of growth: Q4 2025 revenue of $639.3 million was essentially unchanged year-over-year at -0.1% growth, following $624.9 million in Q3 2025 and $618.8 million in Q2 2025, a pattern of low-single-digit sequential expansion that has stalled on a YoY basis. The segment split shows VITAS at $429.9 million and Roto-Rooter at $231.6 million, meaning the hospice business is the dominant driver and any Medicare reimbursement or census softness there disproportionately impacts the consolidated top line. With full-year 2025 revenue running near $2.53 billion across the four reported quarters and analysts projecting roughly $3.07 billion for the coming year, the growth outlook implies a reacceleration that will need to come from VITAS census growth and Roto-Rooter pricing, making the durability of that inflection the central fundamental question. Profitability remains solid but is compressing: Q4 2025 net income of $76.8 million on a 12.0% net margin and 32.2% gross margin compares unfavorably to Q4 2024's $90.3 million net income, 14.1% net margin, and 36.6% gross margin, a clear year-over-year deterioration. The quarterly gross margin path through 2025 — 33.5% in Q1, 29.8% in Q2, 28.9% in Q3, and 32.2% in Q4 — shows volatility with a downward bias versus 2024's 34.6%–36.6% range, consistent with wage inflation and higher patient-care costs in hospice. Operating margin of 13.4% and EBITDA margin of 19.1% in Q4 2025 remain respectable for a healthcare services provider, but the compression trend is the key watch item, and the trailing EPS of $0.04 in the key metrics appears inconsistent with the quarterly diluted EPS of $5.48 reported for Q4 2025, suggesting a data artifact rather than a true earnings collapse. The balance sheet is a genuine strength: debt-to-equity of just 0.158 and a current ratio of 1.05 indicate modest leverage and adequate near-term liquidity, while TTM free cash flow of $325.5 million and a 27.1% ROE demonstrate strong internal cash generation. Q4 2025 operating cash flow of $133.5 million comfortably covered $16.3 million of capex, producing $117.2 million of free cash flow, and the company returned capital aggressively via $174.6 million of stock repurchases and $8.5 million of dividends. The cash flow-to-debt ratio of 0.86 and interest coverage above 190x underscore minimal financial risk, and with a payout ratio of just 11.9%, the dividend is amply covered and has substantial room to grow.
Quarterly Revenue
$639337000.0B
2025-12
Revenue YoY Growth
-0.1%
YoY Comparison
Gross Margin
32.2%
Latest Quarter
Free Cash Flow
$325477000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is CHE Overvalued?
Because Chemed is solidly profitable — Q4 2025 net income of $76.8 million and a positive trailing PE — the PE ratio is the appropriate primary metric, and the stock trades at 23.2x trailing earnings versus 18.4x forward earnings. The gap between the trailing and forward multiples implies the market expects meaningful earnings growth, consistent with analyst EPS estimates of roughly $30.24 for the coming year; the forward PE of 18.4x is undemanding in absolute terms for a defensive healthcare compounder. The PEG ratio of -2.78 is not meaningful given the sign distortion in the underlying growth inputs and should be disregarded in favor of the absolute PE and EV/EBITDA framework. Relative to the broader healthcare sector, Chemed's 23.2x trailing PE and 14.8x EV/EBITDA sit at a modest premium to typical medical-care-facilities valuations, but the premium is defensible given the company's 27.1% ROE, 10.5% net margin, and recession-resistant hospice and plumbing demand. On price-to-sales of 2.43x and price-to-book of 6.29x, the stock looks richer, though the high P/B reflects an asset-light services model with minimal tangible book value rather than an overvaluation signal. The 2.43x PS multiple is well below the 9.4x–16.4x range seen in the historical ratios data, which is largely a function of the historical dataset's inconsistent share-count basis, but the directional takeaway is that current sales-based valuation is not stretched. Historically, Chemed's PE has ranged from roughly 19.5x to 38.2x over the past several years, with the current 23.2x trailing multiple sitting in the lower third of that band and near the 19.5x trough recorded in Q4 2025. That places the stock closer to the cheap end of its own historical range, suggesting the market is pricing in tempered expectations rather than optimism — a potentially attractive setup if margin compression proves transitory. The forward PE of 18.4x, if achieved, would represent a multi-year valuation low, implying that either the earnings recovery is underappreciated or the market is discounting structural reimbursement risk in hospice.
PE
23.2x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 20x~38x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
14.8x
Enterprise Value Multiple
Investment Risk Disclosure
Chemed's financial risks are moderate but centered on margin compression and revenue concentration. The company's gross margin fell from 36.6% in Q4 2024 to 32.2% in Q4 2025, and net margin declined from 14.1% to 12.0% over the same period, reflecting wage inflation and higher patient-care costs. With VITAS accounting for roughly 65% of revenue, any Medicare reimbursement cuts or census softness would disproportionately impact the consolidated top line. However, the balance sheet is strong: debt-to-equity of 0.158, interest coverage above 190x, and $325.5 million in trailing free cash flow provide a cushion against operational setbacks.
Market and competitive risks include valuation compression if the stock's premium multiple contracts. Chemed trades at 23.2x trailing earnings and 14.8x EV/EBITDA, above typical medical-care-facilities valuations. With a beta of 0.506, the stock is less sensitive to broad market swings, but sector rotation away from defensive healthcare names could still pressure the shares. Recent analyst downgrades from RBC Capital and Jefferies suggest that some on the sell-side view the risk/reward as balanced after the stock's 33.3% six-month gain. Additionally, the hospice industry faces regulatory scrutiny over reimbursement and eligibility, which could introduce headwinds.
In a worst-case scenario, persistent margin compression, Medicare reimbursement cuts, and a failure to reaccelerate revenue growth could drive the stock toward its 52-week low of $365.21, representing a 28% decline from the current price of $507.50. The analyst low target of $520 offers little downside protection, implying that if estimates are revised lower, the stock could quickly test the $495 support level and potentially the $365 low. A max drawdown of -22.98% over the past period shows the stock can correct meaningfully when sentiment shifts, and in an adverse scenario, investors could lose 25-30% from current levels.
FAQ
The most severe risk is margin compression, with gross margin falling from 36.6% to 32.2% year-over-year and net margin declining from 14.1% to 12.0%. Second, Medicare reimbursement risk is significant since VITAS generates roughly 65% of revenue from government-funded hospice services. Third, revenue growth has stalled at -0.1% year-over-year, and a failure to reaccelerate could lead to further analyst downgrades. Fourth, the stock trades at a premium valuation, and any de-rating could result in a 20–30% decline toward the 52-week low of $365.21.
Our 12-month forecast has a base case (55% probability) of $520–$580, assuming gradual margin stabilization and low-single-digit revenue growth. The bull case (25% probability) targets $600–$650 if VITAS margins recover above 34% and revenue accelerates. The bear case (20% probability) targets $365–$450 if margin compression persists and Medicare cuts reimbursement. The most likely scenario is the base case, with the key assumption that gross margin stabilizes around 32–33% and analyst EPS estimates of $30.24 are met.
Chemed appears fairly valued to slightly undervalued on a forward basis. The forward PE of 18.4x is near the low end of its historical 19.5x–38.2x range, suggesting the market is pricing in tempered expectations. However, the trailing PE of 23.2x and EV/EBITDA of 14.8x represent a premium to typical medical-care-facilities valuations. The price-to-sales ratio of 2.43x is not stretched relative to history. Overall, the market seems to be discounting structural reimbursement risk in hospice, which could prove overdone if margins recover.
Chemed is a Hold-rated stock with a balanced risk/reward profile. The analyst consensus target of $571.60 implies 12.6% upside, but the stock trades at a premium trailing PE of 23.2x and faces margin compression. The biggest downside risk is a continued decline in VITAS margins, which could push the stock toward its 52-week low of $365.21. For income-oriented investors, the low payout ratio of 11.9% and consistent dividend growth make it attractive, but growth investors may find better opportunities elsewhere. A pullback to the $450–$470 range would improve the risk/reward for new buyers.
Chemed is best suited for long-term investment, given its defensive business mix, low beta of 0.506, and consistent dividend growth. The company's strong free cash flow and low leverage support a buy-and-hold strategy, with a suggested minimum holding period of 2–3 years to allow for margin recovery and Medicare reimbursement clarity. Short-term trading is less attractive due to the stock's low volatility and the lack of near-term catalysts. Income investors may appreciate the growing dividend, while growth-oriented investors should look for a better entry point.
