Talk about a Christmas gift. On Dec. 23, 2003, I was calling Roto-Rooter (yes, the folks that specialize in cleaning your drains and pipes) A Cheap Health-Care Stock. In hindsight, that was a good call. Since then, the stock -- now known as Chemed (NYSE:CHE) -- has jumped 86.2%. Let's see if it's still cheap.

Consolidated revenues increased 16% to $233 million, while net income increased 37% to $14 million. Despite the name change from the iconic Roto-Rooter, the nation's leading plumbing company is still part of the family. In the third quarter, division revenue (compared with the same year-ago quarter) increased 9.2% to $72.9 million (31.3% of total sales) and net income (after adjustments for one-time items) soared 16.5%. Operating margins, at a lucky 13%, are up 0.6% over last year.

The company's lesser-known but larger business is VITAS, the nation's largest hospice provider. Revenue increased 18.7% and net income shot up 28.9%. Operating margins rose 0.2% to 11.1%. Since closing the acquisition in February 2004, Chemed has grown VITAS from 25 programs operating in eight states to 34 programs in 12 states.

When purchasing the 63% of VITAS it did not own for $406 million, Chemed stuck to its conservative roots. Although taking on a sizable $395 million in debt, the company also sold 2 million shares at $50 each -- thereby maintaining reasonable debt-to-equity ratios. Since then, the company has continued to expand VITAS, while reducing Chemed's net debt (total debt minus cash) from $242.4 million a year ago to $197.8 million now.

All of this good news also has a happy ending. Like last quarter, the company is raising earnings guidance for 2005 to a range of $1.87 to $1.90 a share -- excluding the cost for early debt extinguishment and other charges not indicative of ongoing operations. Wall Street liked the news: Chemed was the largest percentage gainer on the NYSE on Friday.

Chemed, at about 25 times estimated 2005 earnings, is expected by analysts to grow earnings by 19% annually for the next five years. That's a pretty hefty multiple by estimation, but it is certainty justified by the company's ability to reduce debt and increase earnings at double-digit rates.

Competitors VistaCare (NASDAQ:VSTA) and Odyssey Healthcare (NASDAQ:ODSY) are struggling with bottom-line results because of Medicare and Medicaid reimbursement problems. Neither is expected to reach Chemed's future growth rate either.

For now, Chemed's stock looks reasonably priced, but it should experience price appreciation ahead of the market if its 19% annual growth materializes. Those looking for a hospice investment in a more broadly based health-care company might want to consider Manor Care (NYSE:HCR), selling for 18.2 times this year's earnings and expected to grow earnings at a 15% clip in the future.

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Fool contributor W.D. Crotty owns shares in Chemed. Click here to see the Motley Fool's disclosure policy.