Addus HomeCare Corp (ADUS) stock intrinsic value fair value estimate & owner earnings analysis

Addus HomeCare provides in-home personal care (help with daily living for elderly and disabled people, mostly paid by state Medicaid programs), plus hospice and home health services. Revenue grew from about $426 million in 2017 to about $1.42 billion in 2025, through steady tuck-in acquisitions and organic growth, including through 2020. The most recent deal, the Gentiva personal-care business acquired in late 2024, is why 2025 revenue jumped about 23%. How we measure earnings. We start from operating cash flow, strip out swings in working capital, and deduct stock compensation as a real cost. Only the portion of capital spending needed to keep the business running is deducted, since expansion spending is treated as growth. Working-capital swings are large here. In 2020 the company gained about $60 million from COVID-era government advances and payroll-tax deferrals, and in 2021 it gave back about $28 million of advances. In 2025 slower payments from Illinois (days outstanding on that payor rose from 40 to 55) tied up about $38 million. Removing these swings gives owner earnings per share of about $2.25 (2019), $2.35 (2020), $4.03 (2021), $3.65 (2022), $4.44 (2023), $5.59 (2024) and $6.92 (2025). Starting level. We use the median of 2022 to 2025, about $5.00 per share. Earlier years pre-date the recent scale-up and are distorted by the COVID advances. We did not take 2025 at face value. It includes about $18 million of deferred income tax benefit, roughly $1 per share, which reflects tax deductions running ahead of book expenses and should not be assumed to repeat at that size. Owner earnings grew about 24% in 2025 but much of that reflects the full-year acquisition. We assume 5% growth in year 1, below that rate. Base case, about $97 per share. Owner earnings grow 5% a year for five years and 3% for the next five. We credit only growth the company has repeatedly delivered from its own cash flow: small acquisitions and steady hours growth in personal care, hospice and home health, with revenue up every year since at least 2017. Credited growth tapers as it moves beyond the demonstrated pace. We left out margin expansion, new-state entry, and any rebound in payment timing. After year 10, earnings are assumed to erode 2% a year, because we can name no contract or product that renews them. The amortization of acquired intangibles, about $8 million a year, is not deducted from earnings because it is non-cash. The gradual fade after year 10 carries that decay. Bear case, about $43 per share. The Illinois Department on Aging, 18% of revenue and 25% of receivables, cuts rates or shifts volume, and the state has historically pressed to reduce program costs. Federal Older Americans Act funding also expired in 2025. Together with the deferred-tax benefit fading, earnings settle near $3.50 per share with no growth and a 2% annual decline. Debt taken on for acquisitions adds to the downside. Bull case, about $140 per share. The Gentiva integration and the current acquisition pace deliver the demonstrated pattern: owner earnings start near $6.00 per share, grow 7% a year for five years and 4% for five, and then fade only 1% a year. Testing the case. The strongest challenge is the 2025 cash jump. We checked it against the cash flow statement: it is helped by deferred taxes, which we haircut, and hurt by the Illinois receivable build, which we removed as timing. The filing gives no explanation for the slower Illinois payments beyond timing, so this remains a point to watch. Illinois concentration fell from 21% to 18.1% of revenue, which modestly lessens that exposure. On our figures the shares appear worth roughly $97, with a plausible range of $43 to $140.