Returns at Acadia Healthcare Company (NASDAQ:ACHC) are on the rise

If we want to find a potential multi-bagger, there are often underlying trends that can provide clues. First, we would like to identify a growth to return to on capital employed (ROCE) and at the same time, a based capital employed. Basically, this means that a business has profitable initiatives that it can continue to reinvest in, which is a hallmark of a blending machine. So when we looked Acadie Health Care Company (NASDAQ:ACHC) and its ROCE trend, we really liked what we saw.

Return on capital employed (ROCE): what is it?

If you’ve never worked with ROCE before, it measures the “yield” (pre-tax profit) a company generates from the capital used in its business. To calculate this metric for Acadia Healthcare Company, here is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)

0.094 = $393 million ÷ ($4.6 billion – $403 million) (Based on the last twelve months to September 2021).

Thereby, Acadia Healthcare Company has an ROI of 9.4%. Ultimately, it’s a poor performer and it underperforms the healthcare industry average by 12%.

NasdaqGS: ACHC Return on Capital Employed January 15, 2022

In the chart above, we’ve measured Acadia Healthcare Company’s past ROI against its past performance, but the future is arguably more important. If you wish, you can view analyst forecasts covering Acadia Healthcare Company here for free.

What can we say about Acadia Healthcare Company’s ROCE trend?

Acadia Healthcare Company did not disappoint when it came to ROCE growth. We found that returns on capital employed over the past five years have increased by 34%. The company now earns $0.09 per dollar of capital employed. When it comes to capital employed, Acadia Healthcare Company appears to be doing more with less, as the company uses 31% less capital to run its business. Acadia Healthcare Company may be selling some assets, so it’s worth checking to see if the company has plans for future investments to further increase returns.

Acadia Healthcare Company ROI Essentials

In a nutshell, we are pleased to see that Acadia Healthcare Company has been able to generate higher returns with less capital. And investors seem to expect more in the future, as the stock has rewarded shareholders with a 50% return over the past five years. That being said, we still think the promising fundamentals mean the company merits further due diligence.

On a separate note, we found 1 warning sign for Acadia Healthcare Company you will probably want to know more.

For those who like to invest in solid companies, look at this free list of companies with strong balance sheets and high returns on equity.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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