CHEMED CORP. $319 (New York symbol CHE; Manufacturing sector; Shares outstanding: 16.1 million; Market cap: $5.1 billion; Dividend yield: 0.4%; Takeover Target Rating: Medium; www.chemed.com) operates two wholly owned subsidiaries: VITAS Healthcare and Roto-Rooter. The two subsidiaries are in distinctly different businesses and have completely separate operations.

VITAS is the largest provider of end-of-life hospice services in the U.S., and Roto-Rooter is the nation’s leading provider of plumbing and drain-clearing services.

Providing daily hospice care, VITAS serves more than 17,000 patients with severe, life-limiting illness. This type of care is focused on making the terminally ill patient’s final days as comfortable and pain-free as possible. It employs a network of physicians, nurses, aides, social workers, clergy and volunteers.

Completely separate, Roto-Rooter relies on a network of company-owned branches, independent contractors and franchisees to provide its plumbing, drain cleaning, and water restoration services throughout the U.S. and Canada. That business also has licensed master franchisees in the Philippines, and the republics of Indonesia and Singapore.

Chemed’s revenue has grown slowly, moving up just 16.6% from $1.43 billion in 2012 to $1.67 billion in 2017. However, earnings rose 35.2% over that same five-year period, from $104.4 million to $141.1 million. Per-share earnings jumped 50.0%, from $5.62 to $8.43, on fewer shares outstanding due to share repurchases.

The company continues to report improved results. In the second quarter of 2018, revenue increased 6.4%, to $441.8 million from $415.1 million a year earlier. Excluding one-time items, earnings per share jumped 30.7%, to $2.81 from $2.15. Results improved for both of Chemed’s businesses.

As of June 30, 2018, the company’s long-term debt was $103.4 million. That’s a low 3% of its market cap. It also held cash of $12.7 million.

Since suitable acquisition candidates in the hospice industry appear to be limited, the company will likely buy back stock rather than make acquisitions. In fact, it spent $84.3 million on share buybacks in the first half of 2018.

There is an opportunity for Chemed to unlock shareholder value by separating itself into two freestanding companies—investors tend to value “pure play” stocks more than conglomerates. However, the company fought off hedge funds in 2009 that tried to break it up and appears to be in no more of a hurry to divide Roto-Rooter and VITAS.

As a growing number of baby boomers move to retirement, VITAS is well positioned to take advantage of those demographic changes. As well, acceptance of hospice care is rising.

Offsetting that is VITAS’s dependence on government: currently, more than 95% of its revenue comes from Medicare and Medicaid programs. That makes it vulnerable to changing government priorities.

Demand for Roto-Rooter’s services continues to grow, and it continues its successful expansion into the water restoration business. Meanwhile, Chemed shares have doubled in the past year. The stock now trades at a high 27.8 times the company’s forecast 2018 earnings per share of $11.47. The $1.20 dividend yields 0.4%.

Chemed is a spinoff buy, but only for aggressive investors.