With Strong Cash Flow, Chemed Stock Poised to Rise?

Chemed (CHE) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market

What Is Happening With CHE

CHE stock is currently trading at P/S (Price-to-Sales) ratio that is at a meaningful discount to its 3-month and 2-year highs, and also below its 3-year average.

The stock may not reflect it yet, but here is what’s going well for the company. VITAS recently increased admissions by 6% in Q4 2025 and secured a new Manatee County, Florida, operating certificate. Medicare Cap limitations are projected to significantly drop to $9.5 million in 2026 from $27.2 million in 2025. While Roto-Rooter’s Q4 revenue declined, management is expanding commercial business managers and using a new search engine optimization provider to drive 3-3.5% revenue growth in 2026. The company also repurchased 400,000 shares and has no debt, with 2026 earnings expected to be second-half weighted.

CHE Has Good Fundamentals

• Good Cash Yield: Not many stocks offer free cash flow yield of 5.9%, but Chemed stock does
• Strong Margin: Last 12 month operating margin of 13.9%
• Growth: Last 12 revenue growth of 6.5% – low growth, but this selection is all about high yield and margin
• Valuation: CHE stock currently trading at 35% below 2Y high, 12% below 1M high, and at a PS lower than 3Y average.

Below is a quick comparison of CHE fundamentals with S&P medians.

*LTM: Last Twelve Months

But What Is The Risk Involved?

While CHE stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. CHE shed about 31% in the Dot-Com crash and fell over 54% during the Global Financial Crisis. The 2018 correction trimmed it by 20%, while the Covid sell-off and Inflation shock dragged it down 31% and 26%, respectively. Even with solid fundamentals, CHE hasn’t been immune to sharp drops. When the market turns, significant dips happen, no matter how strong the setup looks.

For more details and our view, see Buy or Sell CHE Stock.

Stocks Like CHE

Not ready to act on CHE? Consider these alternatives:

1. Zebra Technologies (ZBRA)
2. Owens-Corning (OC)
3. Charles River Laboratories International (CRL)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Dipped last month & meaningfully below 2Y high
3. Current P/S < last few year average
4. Strong operating margin with no instances of large margin collapse
5. High free cash flow yield

A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:

• Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
• Win rate (percentage of picks returning positive) of about 74% for 12-month period
• Strategy consistent across market cycles

Portfolios Win When Stock Picks Fall Short

Individual stocks are unpredictable. A smart portfolio helps you invest, limits downside shocks, and provides upside exposure.

Beating the market consistently is hard, but the Trefis High Quality (HQ) Portfolio makes it look achievable. By selecting 30 high-conviction stocks, the HQ strategy has historically outpaced the S&P 500, S&P Mid-cap, and Russell 2000. See how this curated selection delivers superior risk-adjusted returns in our detailed performance factsheet.