Breaking Down Chemed Corporation (CHE) Financial Health: Key Insights for Investors

You're looking at Chemed Corporation (CHE) and trying to figure out if its unique, two-part business model-hospice care through Vitas Healthcare and plumbing services via Roto-Rooter-still holds up against rising costs. Honestly, the Q3 2025 results show a real split: the company reported consolidated revenue of $624.9 million, a decent 3.1% year-on-year increase, but profitability is under pressure. Specifically, the Roto-Rooter segment saw its Adjusted EBITDA margin drop by a significant 351 basis points to 22.7% in Q3, mostly due to higher labor and insurance costs, even as Vitas Healthcare's net patient revenue grew 4.2% to $407.7 million. Management still guides for a full-year 2025 Adjusted Earnings Per Share (EPS) of $22.00 to $22.30, but with the consolidated operating margin shrinking to 12% from 15.2% a year ago, you have to ask: can they defintely maintain that bottom line, or is this margin compression a near-term risk that the market, which values the company at around $6.34 billion, is overlooking?

Revenue Analysis

You need to know where Chemed Corporation (CHE)'s growth is actually coming from, so you can stop worrying about the overall consolidated numbers. The direct takeaway is that the hospice segment, VITAS Healthcare, is the primary engine of revenue growth in 2025, effectively carrying the more modest performance from Roto-Rooter.

Chemed's total revenue for the trailing twelve months (TTM) ending September 30, 2025, stood at an impressive $2.53 billion, marking a 6.45% year-over-year increase. This growth isn't uniform; it's a tale of two very different businesses. The company operates through two core segments: VITAS Healthcare, which is the nation's largest provider of end-of-life care, and Roto-Rooter, the leading commercial and residential plumbing and drain cleaning service provider. Honestly, it's a strange but defintely profitable mix.

The contribution of these segments shows a clear shift. While the 2024 mix already saw VITAS contributing 63% of total revenue, the 2025 quarterly results emphasize its dominance. In the first quarter of 2025, consolidated revenue hit $646.9 million, with VITAS bringing in $407.4 million in net patient revenue. By the third quarter of 2025, VITAS's net patient revenue was $407.7 million, compared to Roto-Rooter's $217.2 million in revenue. Here's the quick math on the third quarter breakdown:

• VITAS Healthcare: $407.7 million
• Roto-Rooter: $217.2 million

The year-over-year revenue growth rates highlight the divergence. In the first quarter of 2025, VITAS's revenue surged by 15.1%, driven by a 13.1% increase in Average Daily Census (ADC), which is the key metric for hospice. In contrast, Roto-Rooter's revenue grew by a modest 1.8% in the same period. This pattern continued into the third quarter of 2025, where VITAS grew by 4.2% while Roto-Rooter managed only 1.1% growth. The hospice business is simply accelerating faster.

You can see the segment performance clearly when looking at the quarterly growth rates:

What this estimate hides is the impact of acquisitions and Medicare reimbursement changes. VITAS's growth includes the revenue contribution from its April 2024 acquisition of Covenant Health's hospice assets, which added approximately $11.5 million to $12.5 million in Q1 2025 revenue. Plus, a 4.1% increase in Medicare reimbursement rates also boosted VITAS's Q3 2025 performance. For a deeper dive into the valuation, check out Breaking Down Chemed Corporation (CHE) Financial Health: Key Insights for Investors. Your next step should be to model the two segments separately to get a true picture of Chemed's intrinsic value.

Profitability Metrics

You need to know exactly how much profit Chemed Corporation (CHE) is keeping from its revenue, especially as cost pressures are impacting the healthcare and service sectors in 2025. The direct takeaway is that while the company's consolidated margins are healthy for a diversified business, the trend is one of contraction across all key metrics, signaling operational challenges in both its VITAS and Roto-Rooter segments.

For the third quarter ended September 30, 2025, Chemed reported consolidated revenue of $624.9 million. The margins show a clear picture of the firm's financial health and where the operational inefficiencies are emerging. Here's the quick math on the core profitability ratios:

• Gross Profit Margin: The consolidated gross margin stood at approximately 31.51% (Gross Profit of $196.91 million on $624.9 million in revenue).
• Operating Profit Margin: This margin, which accounts for selling, general, and administrative (SG&A) expenses, was approximately 12.0% (Operating Income of $74.75 million).
• Net Profit Margin: The bottom-line net profit margin was approximately 10.28% (Net Income of $64.2 million).

Trends in Profitability and Operational Efficiency

The real story here is the trend. Frankly, 2025 has been a year of margin compression (a decrease in profit margins) for Chemed Corporation. The consolidated operating margin of 12% in Q3 2025 is a notable decline from the 15.2% reported in the same quarter of the prior year, a clear signal that expenses are growing faster than revenue. This isn't a small dip; it's a structural shift that management is actively trying to correct.

The pressure points are visible in the segment-level data. The Roto-Rooter segment's gross margin was 50.7% in Q3 2025, but its Adjusted EBITDA margin declined to 22.7%. This drop points directly to increased operating expenses, specifically the higher costs associated with a strategic shift toward paid lead generation to drive revenue growth. In the hospice business, VITAS Healthcare's Adjusted EBITDA margin (excluding Medicare Cap) was 17.0%, a figure impacted by higher labor and operational costs stemming from an increase in hospital-based admissions. Operational efficiency is defintely being tested by rising input costs and evolving service delivery models.

Industry Comparison: A Tale of Two Businesses

Chemed's diversified structure means we must compare each segment to its respective industry peers to get a true sense of performance. The consolidated figures alone do not tell the whole story. While Chemed's overall net margin of 10.28% is solid, the segments show mixed results when benchmarked:

The key action item is to monitor management's progress on cost control initiatives, particularly in the Roto-Rooter segment, to see if the Adjusted EBITDA margin can recover toward its long-term target of 25-26%. If those margins stabilize, the overall company profitability outlook improves significantly.

Debt vs. Equity Structure

Chemed Corporation's (CHE) financing strategy is strikingly conservative, which is a massive differentiator in the capital-intensive healthcare and services sectors. The direct takeaway here is that Chemed Corporation operates as an effectively debt-free company, relying almost entirely on shareholder equity and retained earnings to fund its operations and growth.

As a seasoned analyst, I can tell you that a balance sheet this clean is rare. For the 2025 fiscal year, specifically as of September 30, 2025, Chemed Corporation reported having no current or long-term debt on its balance sheet. This means the company has zero interest-bearing debt obligations, which dramatically reduces its financial risk, especially in a rising-rate environment.

Debt-to-Equity: A Near-Zero Ratio

The Debt-to-Equity (D/E) ratio is a crucial measure of financial leverage (how much debt a company uses to finance its assets relative to the value of shareholders' equity). Since Chemed Corporation reports $0 in long-term and current debt, its D/E ratio is practically zero. You might see a trailing twelve-month (TTM) figure around 0.13 in some financial data, but that minimal number is likely due to including very small, technical liabilities or a net issuance of just $610 thousand USD in Q3 2025, which is negligible for a company of this size.

Here's the quick math on why this matters:

• Chemed Corporation's D/E: Effectively 0.00 (or 0.13 TTM).
• Industry Standard (Health Care Services): Approximately 0.86 to 0.18.

Capital Allocation: Prioritizing Equity and Flexibility

Chemed Corporation's management clearly prefers to use internally generated cash flow and available credit capacity for strategic capital allocation rather than issuing new debt. Their approach to balancing debt and equity funding is heavily skewed towards managing the equity side through buybacks, which is a strong signal of confidence in future cash flow.

The company's primary debt-related activity in 2025 has been managing its existing liquidity facility and executing massive share repurchases.

• Credit Facility: Chemed Corporation maintains a five-year, $550 million Amended and Restated Credit Agreement, which acts as a strategic war chest for opportunistic moves like acquisitions or large-scale buybacks. As of Q3 2025, they had approximately $404.5 million in undrawn borrowing capacity.
• Equity Funding/Management: In the third quarter of 2025 alone, the company repurchased 407,500 shares of stock for $180.8 million, and the Board authorized an additional $300 million for the share repurchase program in August 2025. This is a massive return of capital to shareholders, effectively reducing the share count and boosting earnings per share (EPS).

This strategy is a deliberate choice: use zero debt to keep the balance sheet pristine, and use cash flow and the flexible revolving credit line to aggressively manage the equity base. This focus on equity management is a key part of the investment thesis. For a deeper dive into who is buying and why, you should read Exploring Chemed Corporation (CHE) Investor Profile: Who's Buying and Why?.

Liquidity and Solvency

You need to know if Chemed Corporation (CHE) has enough ready cash to cover its near-term bills. The quick answer is yes, Chemed's liquidity positions as of the third quarter of 2025 are defintely strong, primarily due to a debt-free balance sheet and healthy cash generation from operations.

A look at the core ratios tells the story. As of September 30, 2025, Chemed's Current Ratio sits at approximately 1.35, and its Quick Ratio is nearly identical at about 1.33.

• A Current Ratio of 1.35 means Chemed has $1.35 in current assets (cash, receivables, etc.) for every dollar of current liabilities.
• The Quick Ratio of 1.33 is strong because it excludes inventories, which are a small part of Chemed's business anyway, showing a high capacity to meet obligations with only the most liquid assets.

Anything above 1.0 is generally good, and these numbers show a comfortable margin of safety. That's a solid foundation.

Analysis of Working Capital Trends

Working capital-the difference between current assets and current liabilities-is your day-to-day financial cushion. For Chemed, this cushion is substantial and positive. As of September 30, 2025, the company had a positive working capital of $103.2 million (in thousands: $395,243 current assets minus $292,041 current liabilities). This positive trend suggests Chemed is effectively managing its short-term resources and is not relying on immediate sales or financing to cover operating costs.

Here's the quick math on the key components (in thousands of USD) for Q3 2025:

Cash Flow Statements Overview

Cash flow tells you where the money is actually coming from and going. For the six months ended June 30, 2025, Chemed's cash flow statement shows a healthy picture, with core operations generating significant cash.

• Operating Cash Flow (OCF): $171.4 million (in thousands: $171,350). This is the most crucial figure; it confirms the core business-VITAS Healthcare and Roto-Rooter-is a powerful cash engine.
• Investing Cash Flow (ICF): ($29.2 million) (in thousands: ($29,155)). This negative number is normal and healthy, reflecting capital expenditures for growth and maintenance, like new equipment or facility upgrades.
• Financing Cash Flow (FCF): ($70.6 million) (in thousands: ($70,641)). This cash outflow is primarily driven by share repurchases and dividend payments, which are returns to shareholders, not debt payments.

The company is generating more cash from operations than it's spending on investments and shareholder returns combined, leading to a net increase in cash. This is the definition of a financially self-sufficient business.

Potential Liquidity Strengths

The primary strength is the company's minimal financial leverage. As of September 30, 2025, Chemed reported no current or long-term debt on its balance sheet. Plus, they have a five-year, $550 million credit facility with approximately $404.5 million in undrawn borrowing capacity available. This massive, unused credit line acts as a powerful, low-risk liquidity backstop, giving management significant flexibility for opportunistic acquisitions or to weather any unexpected downturns.

For a deeper dive into Chemed's overall financial picture, check out the full post: Breaking Down Chemed Corporation (CHE) Financial Health: Key Insights for Investors.

Valuation Analysis

You're looking at Chemed Corporation (CHE) after a tough year for the stock, trying to decide if the recent dip makes it a buy or if the market is telling you something deeper. The quick answer is that while the stock trades at a premium to the broader market, analysts see a significant upside, suggesting it is currently undervalued relative to their price targets.

The stock price closed near $432.38 on November 17, 2025, which is a drop of over 21% in the last 12 months. This decline has brought its valuation multiples down from their 52-week high of $623.61, which is a key opportunity for investors who believe the company's fundamentals remain strong. Based on forward earnings, Chemed Corporation looks fairly valued, but the analyst target suggests a clear upside.

Is Chemed Corporation (CHE) Overvalued or Undervalued?

To figure out Chemed Corporation's true value, we look at three core multiples. For the 2025 fiscal year, the valuation picture is mixed but leans toward a buy signal when you factor in analyst expectations and the recent stock price correction. Here's the quick math on the key ratios:

• Price-to-Earnings (P/E) Ratio: At approximately 23.01x (based on a recent price), Chemed Corporation is trading at a premium to the S&P 500, which suggests investors are willing to pay more for its earnings quality and stability.
• Enterprise Value-to-EBITDA (EV/EBITDA): This metric, which is better for comparing capital-intensive companies, is around 13.3x as of early November 2025. This multiple is defintely reasonable for a specialized healthcare and service company with strong cash flow.
• Price-to-Book (P/B) Ratio: While a precise 2025 figure isn't public yet, the P/B has historically been high, hovering around 7.6x to 8.6x in recent years, reflecting the high value of its intangible assets like its brand and operating licenses, particularly in the VITAS segment.

What this estimate hides is the market's reaction to recent earnings. The company recently missed quarterly earnings estimates, reporting $5.27 earnings per share (EPS) versus a consensus of $5.39, which is part of why the stock has pulled back.

Dividend and Analyst Consensus

Chemed Corporation is not a high-yield stock, but it does offer a stable and growing dividend. The annual dividend is currently $2.40 per share, giving a modest dividend yield of about 0.55% to 0.6%. More importantly, the dividend payout ratio is very low, ranging from 8.7% to 11.01%. This low ratio means the dividend is incredibly safe and the company retains most of its earnings to reinvest in growth, which is a great sign for long-term investors.

Also, the Wall Street consensus is overwhelmingly positive. Analysts collectively rate Chemed Corporation a Moderate Buy or Strong Buy. The average price target is $574.25, with the highest target reaching $595.00. This implies a potential upside of over 31% from the recent trading price, making a strong case for the stock being undervalued right now. The market seems to be pricing in near-term risks, but analysts are focused on the long-term earnings power of the business, which you can read more about in their Mission Statement, Vision, & Core Values of Chemed Corporation (CHE).

Risk Factors

You need to look past Chemed Corporation's (CHE) strong full-year 2025 adjusted EPS guidance of $22.00 to $22.30 per share; that number is built on successfully navigating two major, persistent risks. The core challenge for investors is that both the VITAS and Roto-Rooter segments face distinct, near-term pressures that are already compressing margins, and you defintely need to track their mitigation plans.

Regulatory Headwinds: The Medicare Cap

The biggest external risk for Chemed Corporation, specifically for its VITAS Healthcare segment, remains the Medicare Cap billing limitation. This federal regulation restricts how much reimbursement a hospice provider can receive per patient over a cap year, and the risk is highest in the Florida consolidated program.

To be fair, management is confident and reiterated their 2025 guidance assuming no cap-related revenue limitation for the government fiscal year 2026, which began on October 1, 2025. Still, this is a high-stakes assumption. Earlier in 2025, VITAS projected a potential cap revenue limitation of $18 million to $25 million for the 2025 Cap Year, so the risk is real.

Here's the quick look at the mitigation strategy:

• Increase hospital-based admissions to manage patient mix.
• Maintain hospital admission ratio within the 42-45% range.
• Expand operations into new Florida counties like Marion and Pinellas.

The company is actively managing the patient mix to stabilize this, but any misstep here can directly hit the top line. For more on the shareholder base, you should check out Exploring Chemed Corporation (CHE) Investor Profile: Who's Buying and Why?

Operational and Margin Pressures

The Roto-Rooter segment, while a solid generator of cash flow, is struggling with margin compression. This is an operational risk tied directly to marketing strategy. The company has shifted to relying more on paid leads, which is driving up their selling, general, and administrative (SG&A) expenses.

This increased expense is clearly visible in the Q3 2025 numbers. The segment's gross margin dropped to 50.7% from 52.9% in the same period last year, and adjusted EBITDA fell by 12.4%. That's a sharp decline. The company is trying to offset this by refining pricing for large commercial projects and controlling technician discounting, but the market is competitive.

What this estimate hides is the continued decline in VITAS's profitability metrics, too. For the third quarter of 2025, VITAS's after-tax earnings as a percentage of revenue declined to 11.5% from 13.7% in the prior year, reflecting the higher costs associated with the strategic shift toward hospital-based admissions.

External Market and Financial Risks

Beyond the core business unit issues, Chemed Corporation faces broader external risks common in its sectors. Economic uncertainties like inflation can impact the costs of labor and materials across both the hospice and plumbing segments.

Also, cybersecurity is a growing threat; a recent incident involving a third-party vendor at VITAS highlighted the vulnerability of sensitive patient data and operations. Plus, while the company has no variable rate debt as of September 30, 2025, any future borrowing or refinancing will expose them to interest rate risk. You need to watch for any unexpected rise in legal expenses, which have also contributed to the profitability deterioration in 2025.

Growth Opportunities

You're looking for a clear map of where Chemed Corporation (CHE) is heading, and the picture is one of targeted expansion, mostly driven by its healthcare segment. The core takeaway is that while management has revised its full-year 2025 earnings guidance down slightly, the underlying growth in its primary segment, VITAS Healthcare, remains strong, projecting revenue growth between 7.5% and 8.5% before the Medicare Cap impact. This dual-segment model-hospice care and plumbing services-is defintely the company's biggest shield.

Future Revenue and Earnings Estimates

Chemed's financial trajectory for 2025 is anchored by its two resilient businesses. The company has adjusted its full-year 2025 Adjusted Diluted Earnings-per-Share (EPS) guidance to a range of $22.00 to $22.30, with the midpoint at $22.15. This revision from the initial, higher projection reflects a realistic view of ongoing margin pressures, particularly in the Roto-Rooter segment.

To put this into context, the company's consolidated revenue for the first quarter of 2025 hit $646.9 million, a solid 9.8% increase year-over-year. By the third quarter of 2025, revenue was $624.9 million, showing a 3.1% year-on-year growth, with Adjusted EPS coming in at $5.27. Here's the quick math on the full-year EPS forecast:

Key Growth Drivers and Strategic Initiatives

Chemed's growth isn't abstract; it's driven by very specific, tactical moves in both the healthcare and home services markets. The biggest driver is VITAS Healthcare, the nation's largest end-of-life hospice care provider. They are actively managing the regulatory environment, which is smart.

• Expand hospital-based admissions to mitigate Medicare Cap billing limits.
• Launch new VITAS operations in new geographical areas, like Marion County, Florida, starting in mid-May 2025.
• Integrate strategic acquisitions, like the Covenant Health hospice assets bought in April 2024, which contributed an estimated $11.5 million to $12.5 million in Q1 2025 revenue.
• Refine Roto-Rooter's pricing model for large commercial excavation projects to balance revenue growth with EBITDA margins.
• Increase investment in paid lead generation to offset a decline in unpaid (organic) leads for Roto-Rooter.

The focus on hospital admissions is a key strategic initiative for VITAS, aiming to avoid Medicare Cap limitations and support sustainable long-term growth.

Competitive Advantages and Market Position

What positions Chemed Corporation for this growth is its unique, diversified structure. You have two distinct businesses-VITAS and Roto-Rooter-operating in two highly resilient industries: essential healthcare and necessary home services. This dual approach stabilizes revenue streams and provides a strong financial foundation, which is why Chemed's free cash flow stands robust at $285 million. The company also benefits from an established market position in both core segments and an experienced management team with a proven track record.

The company also maintains a strong balance sheet with no debt, which gives it the financial flexibility to pursue strategic acquisitions and continue its stock repurchase program to enhance shareholder value. If you want a deeper dive into the institutional interest in this model, you should be Exploring Chemed Corporation (CHE) Investor Profile: Who's Buying and Why?