- If you are wondering whether Chemed is attractively priced or still has room to fall, the recent mix of returns and valuation signals gives you plenty to think about.
- The stock last closed at US$436.27, with a gain of 3.7% over the past week, a slight decline of 0.9% over the last month, and returns of 2.9% year to date but a decline of 19.7% over the past year.
- These moves put Chemed on the radar for investors who are reassessing what a fair price might look like after a period of weaker long term performance, including a 3 year return that is down 19.7% and a 5 year return that is down 7.9%. Recent coverage has increasingly focused on how much of this weaker performance is already reflected in the share price and what that implies for valuation.
- On Simply Wall St's 6 point valuation framework, Chemed currently scores 5, which suggests it screens as undervalued in most of the checks that are applied. The next sections will break this down across different valuation methods before turning to an even broader way of thinking about what the stock is worth.
Find out why Chemed's -19.7% 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 estimates what Chemed stock could be worth by projecting future cash flows and discounting them back to today, so you can compare that value with the current share price.
For Chemed, the model used is a 2 Stage Free Cash Flow to Equity approach, based on the company’s latest reported Free Cash Flow of about $385.0 million. The projections include analyst input where available, with Simply Wall St extending those cash flows further out. By 2035, the ten year projection points to Free Cash Flow of around $443.0 million, with each year’s cash flow discounted back to reflect the time value of money.
Pulling all of this together, the DCF model arrives at an estimated intrinsic value of about $688.49 per share. Compared with the recent share price of $436.27, this implies Chemed trades at a discount of around 36.6%, which suggests the stock screens as undervalued on this method.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Chemed is undervalued by 36.6%. Track this in your watchlist or portfolio, or discover 45 more high quality undervalued stocks.
Approach 2: Chemed Price vs Earnings
For a profitable company like Chemed, the P/E ratio is a useful shorthand because it links what you pay for the stock to the earnings the business is currently generating. Investors often use it to gauge how the market is pricing those earnings compared with other opportunities.
What counts as a “normal” or “fair” P/E ratio usually reflects expectations for future growth and the level of risk. Higher growth or lower perceived risk can support a higher multiple, while slower growth or higher risk tends to support a lower one.
Chemed currently trades on a P/E of 22.20x. That is close to the Healthcare industry average P/E of 23.40x and sits well below the peer group average of 97.04x. Simply Wall St’s “Fair Ratio” for Chemed is 23.10x, which is a proprietary estimate of the P/E that might be reasonable given factors such as the company’s earnings profile, margins, industry, market cap and risk characteristics.
This Fair Ratio can be more informative than a simple comparison with peers or the sector because it attempts to adjust for those company specific features. With Chemed’s actual P/E of 22.20x sitting modestly below the Fair Ratio of 23.10x, the stock screens as slightly undervalued on this measure.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.
Upgrade Your Decision Making: Choose your Chemed Narrative
Earlier it was mentioned that there is an even better way to understand what Chemed might be worth. Narratives on Simply Wall St give you a simple way to link your view of the company’s story to a financial forecast, turn that forecast into a Fair Value, and then compare it with the current share price to decide whether the stock looks appealing or not. Each Narrative lives on the Community page, updates automatically when new information such as earnings or news arrives, and reflects different perspectives. For example, one Chemed Narrative might lean closer to a Fair Value near US$400.00 while another uses assumptions that support a Fair Value around US$580.00. This helps you see in one place how differing expectations about future revenue, earnings and margins translate into different valuations and therefore different investment decisions.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com