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Here's Why You Should Invest in Chemed (CHE) Stock Right Now

Zacks Equity Research

Chemed Corporation CHE has been gaining investor confidence on continued positive results. In the past six months, the company has been consistently outperforming the S&P 500 market. The stock has gained 3.2% versus the market’s 3.6% decline.

This Cincinnati, OH-based company has a market cap of $5.20 billion. The company has an expected earnings growth rate of 13.9% for the next three to five years.

With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.

What Makes the Stock an Attractive Pick?

VITAS Holds Potential

Chemed has seen strong performance from the VITAS business over the past few quarters. During fourth-quarter 2018, VITAS admissions generated from hospitals rose 2% and made up 50% of total admissions. Also, home-based admissions rose 2.5%. Overall, VITAS revenues rose 4.9% on a 1.1% rise in geographically-weighted average Medicare reimbursement rate and a 7.3% increase in average daily census. For 2019, the company projects VITAS Healthcare revenue growth (prior to Medicare Cap) of 5.5-6%.

Roto-Rooter Continues to Grow

Roto-Rooter is currently the nation’s leading provider of plumbing and drain cleaning services. Through its network of company-owned branches, independent contractors and franchises, Roto-Rooter offers plumbing and drain cleaning services to more than 90% of the U.S. population. During fourth-quarter 2018, Roto-Rooter reported 10.6% growth year over year. This business displayed robust performance in the core plumbing and drain cleaning service segments as well as solid growth in water restoration. We currently look forward to Roto Rooter’s recently-made acquisition of certain franchises in California.

Shareholders’ Return

Chemed’s capital deployment policy is based on suitable acquisitions and solid return of cash to shareholders through dividends and buybacks. Chemed exited 2018 with total cash and cash equivalents of $4.83 million, showing a significant decline from $11.1 million at the end of 2017. The company had total debt of $89.2 million at the end of 2018, which again reflected a decline from $101.2 million at the end of 2017. At 2018-end, net cash provided by operating activities was $287.1 million compared with $162.5 million at 2017-end.

During the fourth quarter, the company repurchased shares worth $36.9 million. As of Dec 31, 2018, the company had $47 million of remaining share repurchase authorization under this plan.

Which Way Are Estimates Treading?

For the current quarter, the Zacks Consensus Estimate for earnings is pegged at $2.98, reflecting year-over-year growth of 9.6%. The same for revenues stands at $456 million, mirroring 3.8% improvement year over year.

For 2019, the Zacks Consensus Estimate for earnings is pinned at $12.7, reflecting 7% year-over-year growth. The same for revenues is pegged at $1.87 billion, indicating a rise of 4.7%.

Other Key Picks

Other top-ranked stocks in the broader medical space are Varian Medical Systems VAR, Tandem Diabetes Care, Inc. TNDM and DexCom, Inc DXCM. Notably, each of these stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Varian’slong-term earnings growth rate is expected at 8%.

Tandem Diabetes’ long-term earnings growth rate is expected at 20%.

DexCom’s second-quarter earnings per share are projected to grow 160%.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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Tandem Diabetes Care, Inc. (TNDM) : Free Stock Analysis Report
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