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Aggressive Growth

Shares of Acadia Medical (ACHC - Snapshot Report) reached a 52-week high of $25.76 on January 8 following its accretive acquisition of Greenleaf Center a day earlier. Several strategic investments of late and impressive fiscal third-quarter results helped this healthcare services provider become a Zacks Rank #1 (Strong Buy).

The company has delivered an average earnings surprise of 16.7% over the past four quarters, including a 13.3% beat in the third quarter. Given its expected long-term earnings growth rate of 29.0%, this stock looks like it would fit well into the portfolio of a growth seeking investor.

Rank Drivers

On November 6, 2012, Acadia Medical reported fiscal third quarter adjusted earnings per share (EPS) of 17 cents, beating the Zacks Consensus Estimate by 13.3%. However, the result fell short of the year-ago performance due to an increase in its shares outstanding, completion of the PHC Inc. acquisition in November 2011 and an increase in interest expenses.

On January 7, 2013, Acadia Medical purchased Greenleaf Center, a 50-bed acute inpatient psychiatric facility in Georgia, from South Georgia Medical Center. The company noted that Greenleaf, which has $7 million of annual revenues, will remain accretive to its 2013 EPS.

Recently, Acadia Medical has made several strategic acquisitions, including Behavioral Centers of America and AmiCare Behavioral Centers on December 31, 2013. In November, it purchased Park Royal Hospital, a 76-bed acute inpatient psychiatric hospital in Florida.

Also in November, the company declared its intention to buy Arkansas based AmiCare Behavioral Centers, which operates four inpatient psychiatric facilities. Management expects this transaction to be accretive to its 2013 financial results. The company is greatly optimistic about these recent developments, which are expected to act as major catalysts for future growth.

Earnings Estimates Moving Up

The Zacks Consensus Estimate for 2012 is 64 cents, up about 23.8% year over year. Meanwhile, over the past 30 days, the Zacks Consensus Estimate for 2013 gained 4.3% to 98 cents per share, representing year-over-year growth of about 52.9%.

Premium Valuation

Acadia Medical’s valuation looks stretched compared to its peers by most metrics. Based on the 2012 earnings estimate, the company is trading at a P/E of 25.21x, which is almost 1.7 times the peer group average of 16.63x. The price-to-book ratio of 4.10x is also substantially higher than the peer group average of 2.10x. The premium is warranted given a higher long-term earnings growth rate of 29.0%, compared with the industry average 12.7%.

However, with respect to return on assets (ROA), Acadia Medical looks attractive at 3.9%, a marginal premium to the peer group average of 3.5%.

Acadia’s price performance has been reasonably strong. Following the release of its fiscal third-quarter results, the stock showed a steep uptrend and is currently trading above both its 50- and 200-day averages.

Acadia Medical is a provider of inpatient behavioral healthcare services. As of September 30, 2012, the company operates a network of 33 behavioral health facilities with over 2,300 licensed beds in 19 states. Acadia provides psychiatric and chemical dependency services to its patients in a variety of settings, including inpatient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs. The company has a market cap of $1.04 billion.

Other Zacks #1 Rank (Strong Buy) medical devices stocks include Spherix Inc. (SPEX) and Syneron Medical Ltd (ELOS).


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