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Here's Why You Should Bet on Acadia Healthcare (ACHC) Stock

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Zacks Equity Research
·3 min read
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Acadia Healthcare Company, Inc. ACHC has emerged as a lucrative investment option, courtesy of its enhanced behavioral health services, business rejig and growing cash balance.

The stock currently has a Zacks Rank #2 (Buy) and a Value Score of B. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank of 1 or 2, offer the best opportunities in the value investing space.

Factors Driving the Company

Impressive Earnings Surprise History: Acadia Healthcare boasts an impressive earnings surprise record. It has surpassed estimates in each of the trailing four quarters, with average surprise being 20.84%.

Positive Estimate Revision: The Zacks Consensus Estimate for 2021 earnings has been revised upward by 1.5% over the past 60 days.

Solid Prospects: The Zacks Consensus Estimate for the company’s 2021 earnings indicate growth of 13.5% from the year-ago reported figure. The expected long-term earnings growth rate is 12.8%, higher than the industry’s average expectation of 7.8%.

Business Tailwinds: Known as the leading U.S. behavioral healthcare facility, Acadia Healthcare remains focused in meeting the growing demand for behavioral health services by partnering with established healthcare systems. This, in turn, has broadened its treatment network and nationwide presence. As of Sep 30, 2020, the company operated 582 behavioral healthcare facilities in 40 states, Puerto Rico and the U.K. In fact, it has been able to capitalize on the current scenario, wherein the mental health of individuals has come under significant strain due to the COVID-19 pandemic.

Moreover, the company recently inked a deal to divest its U.K. operations to Waterland Private Equity. With the U.K. operations underperforming for quite some now, the initiative is expected to intensify the company’s focus on its core business of mental health and substance use treatment. Another stock in the same space, namely Tenet Healthcare Corporation THC, has undertaken a similar move of divesting its urgent care platform to FastMed Urgent Care.

As the company continues to add beds to its existing U.S. operations, its revenues have been growing as evident from a two-year CAGR growth of 4.7%. Notably, the company added 206 beds its U.S. facilities during the first nine months of 2020, and anticipates to add around 100 beds in the fourth quarter.

Furthermore, it boasts of solid cash generation capabilities, which can be utilized for pursuing numerous growth-related initiatives. The company also has a $500 million revolving credit facility.

Price Performance

Shares of Acadia Healthcare have surged 56.2% in a year compared with the industry’s rally of 13.8%.

The price performance looks impressive in comparison to the stocks in the same space, namely, HCA Healthcare, Inc. HCA and Universal Health Services, Inc. UHS. While HCA Healthcare has gained 17.1% in a year, Universal Health has lost 2.6% in the same time frame.

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Universal Health Services, Inc. (UHS) : Free Stock Analysis Report
Tenet Healthcare Corporation (THC) : Free Stock Analysis Report
HCA Healthcare, Inc. (HCA) : Free Stock Analysis Report
Acadia Healthcare Company, Inc. (ACHC) : Free Stock Analysis Report
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