At US$76.67, Is It Time To Put Acadia Healthcare Company, Inc. (NASDAQ:ACHC) On Your Watch List?
Acadia Healthcare Company, Inc. (NASDAQ:ACHC), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Acadia Healthcare Company’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Acadia Healthcare Company
What's The Opportunity In Acadia Healthcare Company?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 26.12x is currently trading slightly above its industry peers’ ratio of 22.12x, which means if you buy Acadia Healthcare Company today, you’d be paying a relatively sensible price for it. And if you believe Acadia Healthcare Company should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Acadia Healthcare Company’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Acadia Healthcare Company look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 58% over the next couple of years, the future seems bright for Acadia Healthcare Company. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? ACHC’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at ACHC? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on ACHC, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for ACHC, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Acadia Healthcare Company at this point in time. For example - Acadia Healthcare Company has 1 warning sign we think you should be aware of.
If you are no longer interested in Acadia Healthcare Company, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
