Business Breakdowns
Episode 215 Chemed: Empire of Care
Business Breakdowns

Episode 215: Chemed: Empire of Care

Business Breakdowns

Episode 215

Chemed: Empire of Care

Chadd Garcia is a Portfolio Manager at the Ave Maria Focused Fund. We cover the unlikely synergies from Chemed's acquisition of two seemingly disconnected businesses, how operating in tightly regulated markets led to high margins and a defensible moat, and the capital allocation philosophy that drove 20% compounded annual EPS growth.

Show Notes

(00:00:00) Introduction and Overview

(00:00:12) Chemed's Business Philosophy

(00:01:45) History and Evolution of Chemed

(00:05:13) Roto-Rooter: Business Breakdown

(00:08:19) Vitas: Business Breakdown

(00:13:27) Roto-Rooter: Competitive Landscape

(00:20:17) Comparing Roto-Rooter and Vitas

(00:21:20) Vitas: Market Dynamics and Growth

(00:34:41) Capital Allocation and Future Prospects

(00:36:48) Conclusion and Key Takeaways

Chemed: Empire of Care

Introduction

Zack
I'm Zack Fuss and today we are breaking down Chemed. Chemed represents the union of two seemingly distinct businesses, End-of-Life Healthcare and Plumbing Services. As our guest Chadd so aptly puts it, old houses and old people. The two underlying businesses, VITAS and the widely recognized Roto-Rooter, both offer interesting stories in their own right.

The strength of this business has been its intentional and well-executed capital allocation strategy, which has resulted in a 21% EPS CAGR since 2003, which has resulted in a market cap of $8.5 billion and a net cash balance sheet. As mentioned, Chemed operates through two very distinct wholly owned subsidiaries that seem pretty far apart. On the one hand, you have VITAS Healthcare, a leading provider of end-of-life hospice care in the U.S. founded in 1978, and in the other, there's Roto-Rooter, the iconic plumbing, drain cleaning and water cleanup service provider whose roots go all the way back to 1935.

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