AdaptHealth (AHCO)

Healthcare services provider AdaptHealth Corp. (NASDAQ:AHCO) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 1.8% year on year to $820.3 million. The company expects the full year’s revenue to be around $3.22 billion, close to analysts’ estimates. Its GAAP profit of $0.16 per share was 30.4% below analysts’ consensus estimates.

Company Overview

With a network of approximately 680 locations serving patients across all 50 states, AdaptHealth (NASDAQ:AHCO) provides home medical equipment, supplies, and related services to patients with chronic conditions like sleep apnea, diabetes, and respiratory disorders.

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.

AdaptHealth competes with large national providers like Owens & Minor, Lincare Holdings, Rotech Healthcare, and Cardinal Health; regional providers such as DASCO Home Medical Equipment and Quipt Home Medical; and retail giants entering the healthcare space including CVS and Amazon.

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 $3.26 billion in revenue over the past 12 months, AdaptHealth has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, AdaptHealth’s sales grew at an incredible 30.6% 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. AdaptHealth’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.1% over the last two years was well below its five-year trend.

This quarter, AdaptHealth reported modest year-on-year revenue growth of 1.8% but beat Wall Street’s estimates by 2.5%.

Looking ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months, similar to its two-year rate. Although this projection implies its newer products and services will catalyze better top-line performance, it is still below the sector average.

AdaptHealth’s operating margin has risen over the last 12 months and averaged 1.9% over the last five years. The company’s higher efficiency is a breath of fresh air, but its suboptimal cost structure means it still sports lousy profitability for a healthcare business.

Analyzing the trend in its profitability, AdaptHealth’s operating margin of 8% for the trailing 12 months may be around the same as five years ago, but it has increased by 19.4 percentage points over the last two years.

In Q3, AdaptHealth generated an operating margin profit margin of 7.5%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

AdaptHealth’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, AdaptHealth reported EPS of $0.16, up from $0.15 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects AdaptHealth’s full-year EPS of $0.55 to grow 75.5%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

AdaptHealth has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.1%, subpar for a healthcare business.

Taking a step back, an encouraging sign is that AdaptHealth’s margin expanded by 3.3 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability was flat.

AdaptHealth’s free cash flow clocked in at $66.82 million in Q3, equivalent to a 8.1% margin. The company’s cash profitability regressed as it was 2.4 percentage points lower than in the same quarter last year, but it’s still above its five-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

AdaptHealth historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 1.4%, lower than the typical cost of capital (how much it costs to raise money) for healthcare companies.

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, AdaptHealth’s ROIC decreased by 3.2 percentage points annually over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

AdaptHealth reported $80.36 million of cash and $1.90 billion 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 $654.1 million of EBITDA over the last 12 months, we view AdaptHealth’s 2.8× net-debt-to-EBITDA ratio as safe. We also see its $60.28 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.

We enjoyed seeing AdaptHealth beat analysts’ revenue expectations this quarter. We were also glad its full-year EBITDA guidance slightly exceeded Wall Street’s estimates. On the other hand, its EPS missed. Overall, this was a mixed quarter. The stock traded up 2.5% to $9.33 immediately following the results.

Updated: December 4, 2025 at 11:09 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

AdaptHealth isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was exceptional over the last five years, it’s expected to deteriorate over the next 12 months and its declining EPS over the last five years makes it a less attractive asset to the public markets. And while the company’s rising cash profitability gives it more optionality, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

AdaptHealth’s P/E ratio based on the next 12 months is 10.9x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $13.25 on the company (compared to the current share price of $9.34).

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.