CHE

We rate CHEMED CORP (CHE) as a Hold with a composite score of 62.4/100 at a current price of $468.81. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (91th percentile) and quality (70th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (31th percentile) and momentum (62th percentile) tempers our overall conviction. We assign a Narrow Moat rating (57/100), Low uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

CHEMED CORP holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 62.4/100 places it at rank #475 in our full 7,333-stock universe. At $6.5B in market capitalization, CHEMED CORP is a mid-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 5% and favorable momentum (62th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 32% (-27.2pp vs sector) narrow to operating margins of 13% (+9.7pp vs sector) and net margins of 10.6%, yielding a gross-to-net conversion rate of 33%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $468.81, CHEMED CORP is trading near fair value based on current fundamentals. Our value factor score of 63/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 25.4x (roughly in line with the sector median of 23.7x), EV/EBITDA of 20.3x (at a premium), P/B of 6.2x, P/S of 2.7x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to CHEMED CORP. The company exhibits strong financial stability with a beta of 0.23, and a stability factor in the 91th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.23 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 91th percentile and quality factor at the 70th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (91th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate CHEMED CORP's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 24.5%, and the balance sheet is managed within acceptable parameters (D/E: 51%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; CHEMED CORP falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 0.47% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, CHEMED CORP receives a Hold rating with a composite score of 62.4/100 (rank #475 of 7,333). Our quantitative framework assigns a Narrow Moat (57/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 63/100.

Our analysis supports a neutral stance on CHEMED CORP. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.