- If you are wondering whether Chemed is attractively priced after a tough stretch, this article walks through what the current share price may be implying about its value.
- The stock closed at US$401.87, with returns of a 1.5% decline over 7 days, 13.2% decline over 30 days, 5.2% decline year to date, 32.5% decline over 1 year, 21.0% decline over 3 years and 9.6% decline over 5 years. This performance may change how investors think about its risk and return trade off.
- Recent coverage around Chemed has focused less on fresh headlines and more on how the current price lines up with its fundamentals, as investors reassess what they are willing to pay after a multi year pullback. In that context, it may be useful to step back and look at the valuation through several different lenses rather than reacting only to the chart.
- Chemed currently scores 5 out of 6 on our valuation checks, and you can see that valuation score breakdown here. That sets us up to compare traditional valuation methods next and then finish with a broader way to think about what the market might be missing.
Find out why Chemed's -32.5% return over the last year is lagging behind its peers.
Approach 1: Chemed Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes estimates of the cash a business may generate in the future and discounts those amounts back to today to arrive at an estimate of what the entire company could be worth now.
For Chemed, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections. The latest twelve month Free Cash Flow is $329.0 million. Analysts provide explicit forecasts through 2027, with Free Cash Flow of $379.1 million in that year. Simply Wall St then extrapolates cash flows out to 2035, with projected figures such as $326.2 million in 2026 and $476.1 million in 2035, all in $.
When those projected cash flows are discounted back to today, the DCF model produces an estimated intrinsic value of about $717.69 per share. Compared with the recent share price of $401.87, this implies the stock is about 44.0% undervalued under these assumptions.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Chemed is undervalued by 44.0%. Track this in your watchlist or portfolio, or discover 48 more high quality undervalued stocks.
Approach 2: Chemed Price vs Earnings
For profitable companies, the P/E ratio is a useful shorthand because it links what you pay for each share to the earnings that business is currently generating. It helps you see how many dollars of price you are paying for each dollar of earnings.
What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth prospects and risk. Higher growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually call for a lower one.
Chemed currently trades on a P/E of 20.86x, compared with the Healthcare industry average of about 22.07x and a peer group average of 33.75x. Simply Wall St also calculates a “Fair Ratio” for Chemed of 24.51x. This is a proprietary estimate of the P/E the company might attract given factors such as its earnings growth, industry, profit margins, market cap and risk profile.
Because the Fair Ratio adjusts for these fundamentals, it can be more useful than a simple industry or peer comparison. With Chemed’s actual P/E below the Fair Ratio, this framework points to the shares trading at a discount on this metric.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Chemed Narrative
Earlier we mentioned that there is an even better way to understand valuation, so on Simply Wall St’s Community page you can use Narratives to connect your view of Chemed’s story to a set of revenue, earnings and margin forecasts that roll into a Fair Value. You can then compare that Fair Value to the current price to help you decide whether to act now or wait, and see it all update when new news or earnings arrive. One investor might align with a more cautious Chemed Narrative that points to Fair Value around US$443, while another might back a more optimistic Narrative closer to US$580, with both perspectives clearly tied back to the numbers they believe in.
Do you think there's more to the story for Chemed? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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