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Why You Should Hold onto Acadia Healthcare (ACHC) Stock
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Shares of Acadia HealthcareCompany, Inc. (ACHC - Free Report) , have recently gained momentum. Month to date, the stock has returned 15.4% compared with the Zacks categorized Hospitals industry’s increase of 10.8%.
MTD PRICE CHART
We note that this industry is poised to gain from President-elect Donald Trump’s intention to repeal and replace the Affordable Care Act (ACA) and substantially lower healthcare costs for millions of Americans. Most companies from this space, such as HCA Holdings, Inc. (HCA - Free Report) , Universal Health Services, Inc. (UHS - Free Report) , Tenet Healthcare Corp. (THC - Free Report) to name a few, are likely to benefit from such a development and Acadia Healthcare’s stock price appreciation reflects the same.
Adding to the optimism is the company’s Return on Equity (ROE) of 8.9%, which is significantly higher than the hospital industry’s negative ROE of 135%. The stock also has a PEG ratio of 0.88, which is lower than the industry average of 1.07. This shows that the stock is undervalued than its current earnings growth potential.
Acadia Healthcare’s mixed product portfolio helps in diversifying business risk. Increasing awareness of mental health and substance abuse conditions and improved treatment options has resulted in a surge in business for the U.S. acute behavioral health hospital market. In fact, this market is estimated to see $18.4 billion growth by 2020. Healthcare reforms taken up since 2008 also have raised the insurance coverage for patients suffering from such disorders.
Apart from the U.S market, the recent plan of the U.K. government to spend an additional £1 billion (US $ 1.23) per year on mental health by 2020 has opened up a significant long-term opportunity for Acadia Healthcare. The company has cashed in on the opportunities in the market and continues to grow inorganically. Accretive acquisitions across the geographies have substantially boosted the company’s clinical asset base.
However, the company has been witnessing its 2017 estimates moving south over the last 60 days. Nonetheless, we believe that Acadia Healthcare is poised to grow riding on its core strength supported by the growth opportunity offered by the healthcare sector.
The company is expected to release its fourth-quarter earnings on Feb 21, 2017. Our proven model does not conclusively show that the company is poised for an earnings beat this season. This is because the company has an Earnings ESP of 0.00% that complicates surprise prediction in spite of its favorable Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>
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Why You Should Hold onto Acadia Healthcare (ACHC) Stock
Shares of Acadia Healthcare Company, Inc. (ACHC - Free Report) , have recently gained momentum. Month to date, the stock has returned 15.4% compared with the Zacks categorized Hospitals industry’s increase of 10.8%.
MTD PRICE CHART
We note that this industry is poised to gain from President-elect Donald Trump’s intention to repeal and replace the Affordable Care Act (ACA) and substantially lower healthcare costs for millions of Americans. Most companies from this space, such as HCA Holdings, Inc. (HCA - Free Report) , Universal Health Services, Inc. (UHS - Free Report) , Tenet Healthcare Corp. (THC - Free Report) to name a few, are likely to benefit from such a development and Acadia Healthcare’s stock price appreciation reflects the same.
Adding to the optimism is the company’s Return on Equity (ROE) of 8.9%, which is significantly higher than the hospital industry’s negative ROE of 135%. The stock also has a PEG ratio of 0.88, which is lower than the industry average of 1.07. This shows that the stock is undervalued than its current earnings growth potential.
Acadia Healthcare’s mixed product portfolio helps in diversifying business risk. Increasing awareness of mental health and substance abuse conditions and improved treatment options has resulted in a surge in business for the U.S. acute behavioral health hospital market. In fact, this market is estimated to see $18.4 billion growth by 2020. Healthcare reforms taken up since 2008 also have raised the insurance coverage for patients suffering from such disorders.
Apart from the U.S market, the recent plan of the U.K. government to spend an additional £1 billion (US $ 1.23) per year on mental health by 2020 has opened up a significant long-term opportunity for Acadia Healthcare. The company has cashed in on the opportunities in the market and continues to grow inorganically. Accretive acquisitions across the geographies have substantially boosted the company’s clinical asset base.
However, the company has been witnessing its 2017 estimates moving south over the last 60 days. Nonetheless, we believe that Acadia Healthcare is poised to grow riding on its core strength supported by the growth opportunity offered by the healthcare sector.
The company is expected to release its fourth-quarter earnings on Feb 21, 2017. Our proven model does not conclusively show that the company is poised for an earnings beat this season. This is because the company has an Earnings ESP of 0.00% that complicates surprise prediction in spite of its favorable Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>