Chemed Corporation
CHEBusiness Overview
source: coverage-next-full | ticker: CHE | step: "01" | created: 2026-05-29
Step 01 — Business Overview: Chemed Corporation (CHE)
Company Summary
Chemed Corporation is a Cincinnati-based holding company that owns two operationally distinct but financially complementary businesses: VITAS Healthcare, the largest for-profit hospice provider in the United States, and Roto-Rooter, the nation's leading consumer plumbing and drain cleaning services brand. The combination is unusual — healthcare services and home services — but produces a powerful and diversified cash flow engine with defensive characteristics in both segments.
The Two-Segment Structure
VITAS Healthcare (~70% of Revenue)
VITAS Healthcare Corporation is the crown jewel of Chemed's portfolio. Founded in 1978 in Miami, Florida, VITAS was acquired by Chemed in 2004 and has since grown to become the largest for-profit hospice provider in the US by both revenue and average daily census (ADC). VITAS serves terminally ill patients with a prognosis of six months or less, providing palliative care in patients' homes, nursing facilities, assisted living facilities, and inpatient hospice units.
Key Characteristics:
- Serves approximately 18,000-20,000 patients per day (ADC)
- Operates in 14 states + Washington D.C. (primary footprint: Florida, Ohio, Texas, California, New Jersey, Georgia)
- Revenue is almost entirely Medicare and Medicaid reimbursed (~98%)
- Revenue model is per-diem: Medicare pays a daily rate per patient enrolled in hospice benefit
- Four levels of care: Routine Home Care (RHC, ~95% of patient days), Continuous Home Care, Inpatient Respite Care, General Inpatient Care (GIP)
- Medicare hospice benefit is federally mandated and updated annually via CMS rulemaking
Competitive Position:
- #1 for-profit hospice provider in the US (ahead of Amedisys/LHC, Encompass, and thousands of small regional operators)
- Scale advantages in nurse hiring, Medicare cost report management, and regulatory navigation
- Certificate of Need (CON) regulations in some states provide partial competitive barriers
Roto-Rooter (~30% of Revenue)
Roto-Rooter Group, Inc. traces its roots to 1935 and is one of America's most recognized home services brands. It provides plumbing repair and maintenance, drain cleaning, water restoration, and HVAC services across the US and Canada through a combination of company-owned branches and franchised operations.
Key Characteristics:
- Revenue from company-owned branches (majority) and franchise royalties
- Emergency plumbing services: ~55-60% of revenue (non-discretionary, 24/7/365 call response)
- Water/fire/smoke restoration and HVAC: ~40-45% of revenue
- Operates in all 50 states + Canada
- ~50,000+ service calls per week at peak
Competitive Position:
- #1 consumer plumbing brand by brand recognition and revenue
- Franchise network creates national coverage with capital-light economics
- 24/7 emergency response creates recurring, high-urgency demand
Why This Combination Works
The two businesses are complementary in several important ways:
Counter-cyclicality: VITAS is recession-resistant (hospice demand is demographic-driven), while Roto-Rooter is largely non-discretionary (plumbing emergencies don't pause in recessions). Both hold up well in downturns.
Cash flow diversity: VITAS generates predictable, government-reimbursed cash flows. Roto-Rooter generates market-rate consumer cash flows. Neither is correlated with the other.
Capital allocation flexibility: Roto-Rooter's higher EBITDA margins and lower reinvestment needs generate excess cash that funds VITAS capacity expansion and corporate buybacks/dividends.
Management bandwidth: Both businesses are operationally mature with dedicated management teams. Chemed corporate functions as a lean holding company.
Historical Context
Chemed was originally spun out of W.R. Grace & Co. in 1982. For decades it held diversified industrial/chemical businesses. The strategic transformation began with the Roto-Rooter acquisition in 1987 and culminated with the VITAS acquisition in 2004 for ~$406M — one of the best acquisitions in healthcare services history given VITAS's subsequent growth.
Investment Narrative
Chemed is a classic "quality compounder" story:
- Secular tailwind in hospice (aging US population, growing Medicare hospice utilization)
- Dominant #1 market positions in both segments
- Predictable, high-quality earnings with minimal capex requirements
- Management team with exceptional capital allocation record (buybacks, dividends, no dilutive M&A)
- Stock trades at a modest premium to the market but at a discount to pure-play healthcare services peers
Revenue Mix (Approximate FY2024)
| Segment | Revenue | % of Total |
|---|---|---|
| VITAS Healthcare | ~$1.67B | ~70% |
| Roto-Rooter | ~$720M | ~30% |
| Total | ~$2.39B | 100% |
Operating Structure
Chemed employs approximately 16,000-17,000 people across both segments (VITAS is the larger employer, primarily nurses, social workers, chaplains, and home health aides). Roto-Rooter employs technicians, dispatchers, and administrative staff.
Key Investor Considerations
- VITAS Medicare mix: Any changes to CMS hospice reimbursement rates directly impact ~70% of Chemed's revenue
- ADC trajectory: The single most important VITAS metric; COVID disrupted hospice referral patterns for 2+ years
- Roto-Rooter normalization: Post-COVID correction in plumbing demand is largely behind the company
- Litigation/settlement risk: VITAS settled a significant False Claims Act investigation in 2023; risk is always present in a Medicare-reimbursed business
Financial Snapshot
source: coverage-next-full | ticker: CHE | step: "04" | created: 2026-05-29
Step 04 — Financial Snapshot: Chemed Corporation (CHE)
Annual Financial Summary (FY2021–FY2024)
Income Statement Overview
| Metric | FY2021 | FY2022 | FY2023 | FY2024 |
|---|---|---|---|---|
| Total Revenue | $2,140M | $2,183M | $2,291M | $2,390M |
| Revenue Growth | +6.3% | +2.0% | +4.9% | +4.3% |
| VITAS Revenue | $1,491M | $1,509M | $1,569M | $1,670M |
| Roto-Rooter Revenue | $650M | $671M | $722M | $720M |
| Gross Profit | ~$750M | ~$760M | ~$810M | ~$860M |
| Gross Margin | ~35% | ~35% | ~35% | ~36% |
| Operating Income (GAAP) | ~$250M | ~$245M | ~$280M | ~$320M |
| Operating Margin | ~11.7% | ~11.2% | ~12.2% | ~13.4% |
| Net Income (GAAP) | ~$185M | ~$175M | ~$200M | ~$240M |
| Diluted EPS (GAAP) | ~$12.00 | ~$11.90 | ~$14.10 | ~$17.20 |
| Adjusted EPS | ~$17.50 | ~$16.50 | ~$18.50 | ~$22.00 |
| Adjusted EBITDA | ~$340M | ~$335M | ~$370M | ~$420M |
Note: All figures are approximate estimates based on publicly available data and analyst consensus. Actual reported figures may differ.
Segment Operating Performance
| Segment | FY2021 | FY2022 | FY2023 | FY2024 |
|---|---|---|---|---|
| VITAS Operating Income | ~$155M | ~$140M | ~$170M | ~$210M |
| VITAS Operating Margin | ~10.4% | ~9.3% | ~10.8% | ~12.6% |
| Roto-Rooter Operating Income | ~$165M | ~$168M | ~$183M | ~$180M |
| Roto-Rooter Operating Margin | ~25.4% | ~25.0% | ~25.3% | ~25.0% |
Key Earnings Notes by Year
FY2021:
- Roto-Rooter benefited from COVID pull-forward effect (Americans spending more time at home, accelerating plumbing maintenance + restoration work)
- VITAS ADC was pressured by COVID — hospital lockdowns disrupted normal hospice referral pathways from physicians and SNFs
- VITAS admissions and ADC recovered slowly through H2 2021
- Adjusted EPS ~$17.50 included benefits from lower travel costs, deferred expenses
FY2022:
- VITAS continued to grapple with COVID-related ADC suppression (admissions were weaker than pre-COVID baseline)
- Department of Justice / OIG investigation into VITAS billing practices created significant legal overhang
- Management set aside litigation accruals; adjusted EPS excluded legal expenses (~$20-30M pretax per year)
- Roto-Rooter showed slight growth but began normalizing from COVID peak
- VITAS nursing labor cost inflation was a headwind (~5-8% wage increases)
FY2023:
- VITAS settled the DOJ/OIG investigation for approximately $75M — a significant but manageable amount
- Post-settlement, VITAS began recovering ADC as the legal cloud lifted and referral relationships normalized
- VITAS ADC growth resumed in H2 2023
- Roto-Rooter revenue grew ~8% on strong pricing; water restoration segment performed well
- Adjusted EPS ~$18.50 benefited from settlement of uncertainty
FY2024:
- VITAS ADC recovery accelerated — a meaningful inflection year
- Medicare hospice base rate increased ~3.1% for FY2024 (CMS final rule)
- VITAS revenue per patient day rose on favorable mix (higher GIP utilization + SIA payments)
- Roto-Rooter revenue flat YoY (~-0.3%) — housing market slowdown and normalization from elevated restoration work
- Adjusted EPS ~$22.00 — significant acceleration from FY2023
- Strong FCF generation enabled continued buybacks
Adjusted vs. GAAP Reconciliation
Management presents "adjusted" results that exclude:
- Litigation and investigation charges (DOJ/OIG, other legal matters)
- Acquisition-related amortization
- Non-cash stock compensation (partially excluded)
- Other non-recurring items
The adjusted EPS figures are widely used by sell-side analysts and management compensation is tied to adjusted targets. The GAAP-adjusted gap widened in FY2022-2023 due to the investigation and settlement charges.
| Year | GAAP EPS | Adjusted EPS | Delta | Primary Driver |
|---|---|---|---|---|
| FY2021 | ~$12.00 | ~$17.50 | ~$5.50 | Stock comp, amortization |
| FY2022 | ~$11.90 | ~$16.50 | ~$4.60 | Legal accruals, amortization |
| FY2023 | ~$14.10 | ~$18.50 | ~$4.40 | Settlement, amortization |
| FY2024 | ~$17.20 | ~$22.00 | ~$4.80 | Amortization, stock comp |
Profitability Metrics
| Metric | FY2021 | FY2022 | FY2023 | FY2024 |
|---|---|---|---|---|
| Gross Margin | ~35% | ~35% | ~35% | ~36% |
| EBITDA Margin | ~15.9% | ~15.3% | ~16.2% | ~17.6% |
| Net Margin (GAAP) | ~8.6% | ~8.0% | ~8.7% | ~10.0% |
| Effective Tax Rate | ~24% | ~24% | ~24% | ~24% |
Cash Flow Summary
| Metric | FY2021 | FY2022 | FY2023 | FY2024 |
|---|---|---|---|---|
| Cash from Operations | ~$290M | ~$270M | ~$300M | ~$350M |
| Capex | ~$75M | ~$80M | ~$85M | ~$90M |
| Free Cash Flow | ~$215M | ~$190M | ~$215M | ~$260M |
| FCF Margin | ~10% | ~8.7% | ~9.4% | ~10.9% |
| FCF/Adjusted Net Income | ~80% | ~75% | ~75% | ~80% |
Capex is primarily for VITAS inpatient unit construction/leasehold improvements and IT systems. Roto-Rooter capex is modest (fleet, equipment).
Valuation Context
| Metric | FY2024A | FY2025E |
|---|---|---|
| Revenue | ~$2,390M | ~$2,520M |
| Adjusted EPS | ~$22.00 | ~$24.00 |
| Adjusted EBITDA | ~$420M | ~$460M |
| P/E (Adjusted, at ~$500 price) | ~22.7x | ~20.8x |
| EV/EBITDA (at ~$7.5B EV) | ~17.9x | ~16.3x |
| FCF Yield | ~3.5% | ~4.0% |
Chemed typically trades at 20-25x adjusted earnings — a premium to the S&P 400 but below pure-play healthcare services names. The discount to healthcare peers partly reflects the Roto-Rooter "conglomerate discount" and the VITAS Medicare regulatory risk premium.
Deeper Financial Analysis
The fundamental tier adds 9 additional research dimensions for $CHE.