Addus HomeCare (ADUS)

Home healthcare provider Addus HomeCare (NASDAQ:ADUS) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 25% year on year to $362.3 million. Its non-GAAP profit of $1.56 per share was 1.7% above analysts’ consensus estimates.

Company Overview

Serving approximately 66,000 clients across 22 states with a focus on "dual eligible" Medicare and Medicaid beneficiaries, Addus HomeCare (NASDAQ:ADUS) provides in-home personal care, hospice, and home health services to elderly, chronically ill, and disabled individuals.

The senior health, home care, and hospice care industries provide essential services to aging populations and patients with chronic or terminal conditions. These companies benefit from stable, recurring revenue driven by relationships with patients and families that can extend many months or even years. However, the labor-intensive nature of the business makes it vulnerable to rising labor costs and staffing shortages, while profitability is constrained by reimbursement rates from Medicare, Medicaid, and private insurers. Looking ahead, the industry is positioned for tailwinds from an aging population, increasing chronic disease prevalence, and a growing preference for personalized in-home care. Advancements in remote monitoring and telehealth are expected to enhance efficiency and care delivery. However, headwinds such as labor shortages, wage inflation, and regulatory uncertainty around reimbursement could pose challenges. Investments in digitization and technology-driven care will be critical for long-term success.

Addus HomeCare's competitors include other home healthcare providers such as Amedisys (NASDAQ:AMED), LHC Group (acquired by UnitedHealth Group's Optum), Encompass Health (NYSE:EHC), and Brookdale Senior Living (NYSE:BKD), as well as numerous regional and local home care agencies.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $1.35 billion in revenue over the past 12 months, Addus HomeCare is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Luckily, Addus HomeCare’s sales grew at a solid 12.1% compounded annual growth rate over the last five years. Its growth beat the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Addus HomeCare’s annualized revenue growth of 14.4% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can better understand the company’s revenue dynamics by analyzing its number of average billable patients, which reached 50,480 in the latest quarter. Over the last two years, Addus HomeCare’s average billable patients averaged 15.9% year-on-year growth. Because this number is better than its revenue growth, we can see the company’s average selling price decreased.

This quarter, Addus HomeCare reported robust year-on-year revenue growth of 25%, and its $362.3 million of revenue topped Wall Street estimates by 2.2%.

Looking ahead, sell-side analysts expect revenue to grow 10% over the next 12 months, a deceleration versus the last two years. Still, this projection is healthy and indicates the market sees success for its products and services.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Addus HomeCare was profitable over the last five years but held back by its large cost base. Its average operating margin of 8.3% was weak for a healthcare business.

On the plus side, Addus HomeCare’s operating margin rose by 2.2 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming in on its more recent performance, we can see the company’s trajectory is intact as its margin has also increased by 1 percentage points on a two-year basis.

This quarter, Addus HomeCare generated an operating margin profit margin of 9.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Addus HomeCare’s EPS grew at a spectacular 14.4% compounded annual growth rate over the last five years, higher than its 12.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Addus HomeCare’s earnings to better understand the drivers of its performance. As we mentioned earlier, Addus HomeCare’s operating margin was flat this quarter but expanded by 2.2 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Addus HomeCare reported adjusted EPS of $1.56, up from $1.30 in the same quarter last year. This print beat analysts’ estimates by 1.7%. Over the next 12 months, Wall Street expects Addus HomeCare’s full-year EPS of $5.85 to grow 14.4%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Addus HomeCare has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 8.5% over the last five years, slightly better than the broader healthcare sector.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Addus HomeCare’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 8%, slightly better than typical healthcare business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Addus HomeCare’s ROIC increased by 1.8 percentage points annually over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Addus HomeCare reported $101.9 million of cash and $202.5 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $167.4 million of EBITDA over the last 12 months, we view Addus HomeCare’s 0.6× net-debt-to-EBITDA ratio as safe. We also see its $4.57 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was encouraging to see Addus HomeCare beat analysts’ revenue expectations this quarter. EPS also exceeded expectations. Overall, this print had some key positives. The stock remained flat at $118 immediately following the results.

Updated: December 3, 2025 at 11:08 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Addus HomeCare, you should also grasp the company’s longer-term business quality and valuation.

Addus HomeCare isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was solid over the last five years and Wall Street believes it will continue to grow, its subscale operations give it fewer distribution channels than its larger rivals.

Addus HomeCare’s P/E ratio based on the next 12 months is 17.9x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $141.50 on the company (compared to the current share price of $117.96).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.