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By Bill Wilton

Chemed Corp. (NYSE:CHE) is growing through its hospice care services and acquiring franchises across the country. The company is also repurchasing its stock and just reported solid quarterly earnings.

Company Description

Chemed Corporation is the nation's largest provider of end-of-life hospice care services through its VITAS Healthcare Corporation subsidiary. Chemed also maintains a presence in the residential and commercial repair-and-maintenance industry through two subsidiaries.

Roto-Rooter is North America's largest provider of plumbing and drain cleaning services. Service America Network Inc. provides major-appliance and heating/air-conditioning repair, maintenance, and replacement services.

Another Earning Surprise

On Oct 21 Chemed reported impressive third-quarter results that included earnings per share of 79 cents. Earnings came in 3 cents over the consensus for the second consecutive surprise and the third in the past 4 quarters.

Revenue rose to $288 million, a 5.8% year-over-year increase. The main driver was the VITAS segment, which saw patient revenue rise 8.7% to $205 million.

Analyts Revise Estimates

Currently the consensus for 2008 is $3.19, or an 8% increase over 2007. The full-year estimate is up 12 cents in the past 2 months.

Analyst estimates for 2009 are now averaging $3.43, another 8% gain, up from $3.28 2 months ago.

The most recent estimates, or the Upside factor of the Zacks Rank, is above the consensus. While the earnings forecast for this and next quarter is about 2% higher than the consensus, the estimate for 2009 is $3.76, almost 10% higher than the average.

These growth rates are all trading at an attractive valuation. The 5-year rate is 15% as shares trade at 12 times earnings. Using these figures we get a PEG ratio of 0.8.

Stock Buy-Back Plan

Earlier this year, on May 20, Chemed announced a $100 million share repurchase program. The company will use cash and its credit facilities to repurchased the stubs.

Buying Up Franchises

Chemed has bought three franchises this year, under the Roto-Rooter name. The companies are located in Topeka, Colorado Springs, and Dayton.

The Chart

Shares of CHE have a strong level of support just under $33-$34. Take a look at the chart below.

Disclosure: No positions

Source: Chemed Corporation Showing Strong Growth