Acadia Healthcare Co (ACHC): A Comprehensive Analysis of Its Valuation
Acadia Healthcare Co Inc (NASDAQ:ACHC) has experienced a daily gain of 3.6%, and a 3-month gain of 0.35%. With an Earnings Per Share (EPS) (EPS) of 2.96, the question arises: Is the stock fairly valued? This article provides a detailed valuation analysis of Acadia Healthcare Co, encouraging readers to delve into the financial dynamics of the company.
Company Overview
Acadia Healthcare Co Inc is a prominent player in the behavioral healthcare sector, operating facilities across the United States, United Kingdom, and Puerto Rico. The company's primary revenue sources are acute inpatient psychiatric facilities and specialty treatment facilities in the U.S., with a significant proportion of payments coming from Medicaid and commercial payors. In the U.K., the National Health Service largely funds Acadia's healthcare facilities.
At a stock price of $74.73, Acadia Healthcare Co Inc (NASDAQ:ACHC) has a market cap of $6.90 billion. The GF Value, an estimation of the fair value of the stock, stands at $81.05, paving the way for a deeper exploration of the company's value.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally trade. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Acadia Healthcare Co's stock shows every sign of being fairly valued based on the GuruFocus Value calculation. At its current price of $74.73 per share, Acadia Healthcare Co has a market cap of $6.90 billion, indicating a fair valuation. As Acadia Healthcare Co is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent capital loss. Therefore, it is crucial to thoroughly review a company's financial strength before deciding to buy its stock. Acadia Healthcare Co's cash-to-debt ratio of 0.07 is lower than 86.35% of companies in the Healthcare Providers & Services industry. GuruFocus ranks the overall financial strength of Acadia Healthcare Co at 6 out of 10, indicating fair financial strength.
Profitability and Growth
Companies that have consistently been profitable over the long term offer less risk for investors. Acadia Healthcare Co has been profitable for 8 of the past 10 years. Over the past twelve months, the company had a revenue of $2.80 billion and EPS of $2.96. Its operating margin is 17.5%, ranking better than 85.67% of companies in the Healthcare Providers & Services industry. The overall profitability of Acadia Healthcare Co is ranked 7 out of 10, indicating fair profitability.
Growth is a crucial factor in a company's valuation. Acadia Healthcare Co's 3-year average annual revenue growth of 7.6% ranks lower than 53.36% of companies in the Healthcare Providers & Services industry. However, its 3-year average EBITDA growth rate of 15.1% ranks better than 58.8% of companies in the industry.
ROIC vs WACC
Another way to evaluate a company's profitability is by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Acadia Healthcare Co's ROIC is 8.01, while its WACC is 9.13. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders.
Conclusion
In conclusion, the stock of Acadia Healthcare Co (NASDAQ:ACHC) shows every sign of being fairly valued. The company's financial condition and profitability are fair, and its growth ranks better than 58.8% of companies in the Healthcare Providers & Services industry. For more information about Acadia Healthcare Co's stock, check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
