Just over a decade since its creation, Acadia Healthcare (symbol ACHC , $61) runs the largest network of private treatment centers for mental health and addiction problems, with 256 locations in the U.S. and the U.K. With more people gaining access to insurance and revenues climbing as the firm expands, Acadia's profits are expected to jump 24% in 2016. Although Acadia, at 24 times estimated earnings, is hardly cheap, the shares don't reflect the firm's growth potential, says BMO Capital Markets, which has a 12-month price target on the stock of $92. (Prices are as of October 30.)
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Drugstore chain CVS Health ( CVS , $99) bulked up big-time in 2015, buying Target's 1,660 pharmacies for $1.9 billion and paying $12.9 billion for Omnicare, a provider of pharmacy services to nursing homes. Both deals should help boost revenues, even as CVS expands in other areas, such as walk-in clinics and drug-benefits management, a business that accounts for about one-fifth of all prescriptions in the U.S. Wall Street analysts see sales and profits rising about 13% in 2016. Rating the stock a "strong buy," research firm S&P Capital IQ has a 12-month price target of $127.
Cars are becoming high-tech machines on wheels, with "adaptive" safety systems, computerized powertrains and software to help guide them down the road. Analysts estimate that by selling these and other products to carmakers, Delphi Automotive ( DLPH , $83) will see sales rise by 12% in 2016 and profits climb by 20%. A slowdown in China is denting sales, and Delphi could see fallout from the emissions scandal at Volkswagen. But Delphi's long-term growth story remains intact, says Credit Suisse analyst Dan Galves. (Although Delphi is based in England, key execs work in Michigan.)
Every item at Dollar Tree ( DLTR , $65) costs a buck or less, but the bigger bargain may be its stock. After buying Family Dollar in 2015, Dollar Tree runs 13,900 stores that will generate more than $20 billion in sales over the next year. Investors seem to doubt the deal's merits, and the stock has sunk from $82 last summer. But Dollar Tree should be able to boost profits at the old Family Dollar stores and lift the combined firm's earnings more than expected, says Stacie Cowell, comanager of the Rainier Mid Cap Equity Fund. She sees the stock topping $90 within the next two years.
Even if oil prices stay low in 2016, refiner Phillips 66 ( PSX , $89) should prosper. Low crude prices mean higher profit margins at Phillips's refining operations and gas stations, and the company is investing in such promising areas as natural-gas pipelines, processing facilities and petrochemical plants. Compared with other refiners, the stock's valuation looks compelling given Phillips's diverse business mix and growth potential, says Oppenheimer & Co. analyst Fadel Gheit. Another fan: Warren Buffett, whose Berkshire Hathaway owns more than 10% of Phillips's shares.
As the largest U.S. domestic airline, Southwest Airlines ( LUV , $46) is flying high these days. Low jet-fuel prices are boosting profit margins, and the carrier is seeing strong demand for its seats, flying planes at a record 85% of capacity. Southwest should fare well as it starts to fly more international routes, launching service to Mexico and other parts of the Caribbean, for instance. It's also expanding domestically. Even with big gains in the stock over the past year, it "has a lot of runway left," says analyst Helane Becker of investment bank Cowen and Co.
Some retailers sell cosmetics; others run beauty salons. Combining both businesses in its 817 stores, Ulta Salon, Cosmetics & Fragrance ( ULTA , $174) is thriving. Sales have been rising at a 22% annual pace as Ulta has opened about 100 stores a year, aiming for more than 1,200 in North America. The shares aren't cheap, at 31 times estimated earnings for the fiscal year that ends in January 2017. But Ulta has never traded in the bargain bin, and it offers one of the highest growth rates of any major retailer. Analysts forecast that earnings will jump 19% in the 2017 fiscal year.
Nike reigns as the king of sports apparel and footwear, but Under Armour ( UA , $95) seems to be the charmed prince. By 2018, the company aims to more than double annual sales, to $7.5 billion, as it opens more Under Armour stores, expands abroad and develops high-tech fitness gear. The stock, at 70 times estimated 2016 earnings, looks off-the-charts expensive, but it's worth the price, says Michael Cuggino, manager of Permanent Portfolio Aggressive Growth Fund. "Under Armour is a similar story to Facebook," he says, "except that it's in the apparel business."
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