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Acadia Healthcare (ACHC) Up 10% in 3 Months: More Room to Run?

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Shares of Acadia Healthcare Company, Inc. (ACHC - Free Report) have gained 10.3% in the past three months outperforming the industry’s rally of 2.7% and the Medical sector’s decline of 7.8%. The S&P 500 composite index has lost 5.3% in the same time frame. With a market capitalization of $5.8 billion, the average volume of shares traded in the last three months was 0.5 million.

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A well-performing U.S. business, a robust care network owing to continuous acquisitions and collaborations, a sound financial position and a reduced debt level are driving Acadia Healthcare’s performance.

This Zacks Rank #3 (Hold) behavioral healthcare services provider delivered a trailing four-quarter earnings surprise of 3.92%, on average.

Can ACHC Retain the Momentum?

The Zacks Consensus Estimate for Acadia Healthcare’s 2022 earnings is pegged at $2.99, indicating an increase of 16.8% from the prior-year reported figure on 11.5% higher revenues of $2.6 billion. The consensus mark for 2023 earnings stands at $3.34, which suggests growth of 11.6% from the year-ago reported figure on 7.7% increased revenues of $2.8 billion.

The Zacks Consensus Estimate for ACHC’s 2022 earnings has moved north by 1.4% in the past 30 days, while the same for 2023 has moved up 2.1% in the past 30 days, reflecting analysts’ optimism on the stock. The expected long-term earnings growth rate is pegged at 10.3%, better than the industry’s average of 8.5%.

A strong U.S. business, courtesy of robust volumes and operational efficiencies, has been contributing substantially to the revenue growth of Acadia Healthcare for a while. Continued pursuit of a growth strategy through acquisitions or collaborations with healthcare providers, with an aim to bolster and diversify its base of operations, is expected to provide a boost to ACHC’s revenues in the days ahead. Some of the notable joint ventures of Acadia Healthcare include those with Minnesota-based Fairview Health Services, Colorado-based SCL Health and Florida-based Orlando Health.

These growth-related efforts have led the healthcare provider to either inaugurate new facilities or expand existing ones, thereby sustaining its reputation of being one of the leading mental health services providers throughout the United States.

For 2022, revenues of Acadia Healthcare are projected to be $2.55-$2.60 billion. The mid-point of the newly provided guidance suggests 11.5% growth from the prior-year figure. Further, the mid-point meets the Zacks Consensus Estimate of $2.58 billion.

Undoubtedly, ACHC boasts an expansive care network of 238 behavioral healthcare facilities comprising around 10,500 beds across 40 states and Puerto Rico at the end of 2021. Robust demand for behavioral healthcare services due to the continued incidence of mental health issues in the United States is anticipated to provide the perfect ground for Acadia Healthcare to capitalize on in the days ahead.

ACHC has a solid financial standing, backed by a strong cash balance and adequate cash-generating abilities. It generated cash from operations worth $374.5 million in 2021. The debt level and associated interest expenses of Acadia Healthcare declined significantly last year. Consequently, at the end of 2021, its leverage ratio of 37.3 has improved 2,490 basis points from the 2020-end level and remained way lower than the industry’s figure of 91.9%.

ACHC has a favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, the best growth curve and the most promising momentum.

Stocks to Consider

Some better-ranked stocks in the medical space are Mednax, Inc. (MD - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and Gamida Cell Ltd. (GMDA - Free Report) . While Mednax flaunts a Zacks Rank #1 (Strong Buy), Patterson Companies and Gamida Cell carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of Mednax outpaced estimates in each of the last four quarters, the average surprise being 27.99%. The Zacks Consensus Estimate for MD’s 2022 earnings suggests an improvement of 12.9%, while the same for revenues suggests growth of 4.2% from the corresponding year-ago reported figures. The consensus mark for Mednax’s 2022 earnings has moved north by 7% in the past 60 days.

Patterson Companies delivered a trailing four-quarter earnings surprise of 2.72%, on average. The Zacks Consensus Estimate for PDCO’s 2022 earnings suggests an improvement of 11%, while the same for revenues suggests growth of 9.5% from the corresponding year-ago reported figures.  The consensus mark for Patterson Companies’ 2022 earnings has moved north by 1.9% in the past 30 days.

The bottom line of Gamida Cell outpaced earnings estimates in three of the last four quarters and missed once, the average surprise being 12.92%. The Zacks Consensus Estimate for GMDA’s 2022 earnings suggests an improvement of 23% from the year-ago reported figure. The consensus mark for Gamida Cell’s 2022 earnings has moved north by 13.3% in the past 30 days.

Shares of Patterson Companies and Gamida Cell have gained 6% and 70.8%, respectively, in the past three months. Meanwhile, Mednax stock has lost 11.2% in the same time frame.