Business Breakdowns Chemed: Empire of Care - [Business Breakdowns, EP.215]
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May 1, 2025 Chadd Garcia, a portfolio manager at the Ave Maria Focused Fund, joins to explore Chemed's fascinating fusion of hospice care through VITAS and plumbing services via Roto-Rooter. Garcia breaks down how this unlikely pairing enhances shareholder value and drives growth, with VITAS focusing on comfort in end-of-life care while Roto-Rooter tackles emergency plumbing challenges. He also shares insights on their strategic capital allocation, competitive advantages, and the impacts of market dynamics on both sectors, revealing how this unique business model thrives in today's landscape.
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Chemed's Free Cash Flow Focus
- Chemed's management focuses uniquely on growing free cash flow per share, regardless of business type.
- Their disciplined capital allocation has driven a 21% EPS CAGR and significant buybacks since 2004.
Roto-Rooter's Service Model
- Roto-Rooter thrives as the gold standard for emergency plumbing services, with 70-75% emergency or same-day calls.
- It operates via company-owned branches, franchises, and independent contractors with robust back-office support.
VITAS Hospice Care Model
- VITAS provides hospice care mainly at patients' homes, focusing on comfort at end-of-life.
- It offers palliative care as an alternative to costly, often ineffective curative treatments in final days.