Factors that make Acadia Healthcare (ACHC) an attractive bet now

Acadia Healthcare Company, Inc. ACHC is well-positioned for growth, with continued top-line improvement driven by strong US business, an extensive healthcare network resulting from numerous joint ventures (JVs), strong forecasts financial statements for 2022 and to a solid financial position.

Zacks Ranking and Price Performance

Acadia Healthcare currently carries a Zacks rank #2 (purchase).

The title gained 18.5% over one year against a drop of 24.3% for the sector. The Zacks Medical sector and the S&P 500 composite lost 16.4% and 11.3% respectively during the same period.

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Favorable style rating

Acadia Healthcare has an impressive value score of B. The value score helps find undervalued stocks. Back-tested results showed that stocks with a favorable Value Score, when combined with a strong Zacks Rank, are the best investment bets.

Robust growth prospects

Zacks consensus estimate for ACHC earnings in 2022 pegged at $3.05 per share, indicating a 19.1% increase on revenue up 12.1% from 2.6 billions of dollars. The consensus rating for 2023 earnings stands at $3.30, suggesting 8.3% growth on revenue up 8.3% to $2.8 billion.

The expected long-term earnings growth rate is pegged at 12.5%, better than the industry average of 9.6%.

His history of surprise results

Acadia Healthcare boasts of a surprise record of decent profits. It has exceeded earnings estimates in two of the last four quarters, missed once and met once, with the average surprise being 4.40%.

Solid outlook for 2022

ACHC forecasts revenue between $2.55 billion and $2.60 billion, the midpoint of which indicates an increase of nearly 12% over the reported 2021 figure. Adjusted EBITDA is estimated between 575 and $610 million, with the midpoint of the forecast suggesting 6% growth from the 2021 figure.

Adjusted earnings per diluted share are expected in the range of $2.85 to $3.15, implying growth of 17.2% from the 2021 level.

Business winds

Acadia Healthcare’s revenues continue to benefit from a strong US business which is currently benefiting from strong patient volumes and operational efficiencies. The continued incidence of mental health issues among Americans is expected to support strong demand for behavioral health services, which in turn should continue to benefit Acadia Healthcare revenues in the days ahead.

Acadia Healthcare often uses joint ventures with renowned US healthcare systems to inaugurate new facilities or expand existing facilities. The recent joint venture with one of Massachusetts’ most established integrated healthcare systems, Tufts Medicine, marks Acadia Healthcare’s 17th joint venture partnership. It also remains positive for 2022, which is likely to be ACHC’s strongest year when it comes to joint ventures.

In addition to increasing revenue, these growth efforts have diversified Acadia Healthcare’s healthcare network and allowed it to delve into areas struggling with inaccessibility to care. ACHC’s portfolio included 238 behavioral healthcare facilities across 40 states and Puerto Rico as of March 31, 2022.

Acadia Healthcare boasts a strong financial position, supported by sufficient cash reserves to service short-term debt. In order to focus more on the US business and repay its debts, ACHC divested its underperforming UK business last year. Clearly, the transaction has paid off for Acadia Healthcare, as its total debt is on a downward trend. It’s worth mentioning that interest expense fell 45.6% year-over-year in the first quarter of 2022. Its debt-to-equity ratio has been improving for some time.

Acadia Healthcare has adequate cash-generating capabilities, which paves the way for it to undertake uninterrupted business investments. ACHC had $440 million under its $600 million revolving credit facility as of March 31, 2022.

Other actions to consider

Other top-ranked stocks in the medical space include AMN Healthcare Services, Inc. AMN, Avantor, Inc. AVTR and ShockWave Medical, Inc. SWAV. While AMN Healthcare and ShockWave Medical sport a #1 Zacks rank (Strong Buy), Avantor wears a #2 Zacks rank. You can see the full list of today’s Zacks #1 Rank stocks here.

AMN Healthcare’s earnings have exceeded estimates in each of the past four quarters, with the average surprise being 15.60%. The Zacks consensus estimate for AMN earnings in 2022 suggests 29.6% year-over-year growth, while the same for revenue implies a 25.5% improvement. AMN Healthcare’s consensus mark for 2022 earnings has moved north 2.8% in the past 60 days.

Avantor has a four-quarter earnings surprise of 10.93% on average. Zacks consensus estimate for AVTR earnings in 2022 points to 7.1% year-over-year growth, while the same for revenue suggests 7.7% growth. Avantor has a value score of B.

ShockWave Medical’s net income has exceeded estimates in each of the past four quarters, with the average surprise being 189.99%. Zacks’ consensus estimate for SWAV’s earnings in 2022 is pegged at $2.05 per share, which compares favorably to the 26-cent loss a year earlier. Similarly for revenues indicate a growth of 90.5%. ShockWave Medical’s consensus mark for 2022 earnings has moved north 11.4% in the past 30 days.

Shares of AMN Healthcare and ShockWave Medical gained 14.6% and 6.5% respectively in one year. However, Avantor stock lost 13.7% over the same period.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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