Here's Why You Should Hold Onto Acadia Healthcare (ACHC) Now

Acadia Healthcare Company, Inc. ACHC should continue to benefit from a consistent top line, solid U.S. business, numerous growth-related initiatives in the form of buyouts and joint ventures (JVs), coupled with sufficient cash-generating abilities.

Zacks Rank & Price Performance

Presently, Acadia Healthcare carries a Zacks Rank #3 (Hold).

The stock has rallied 19.6% over a year compared with the industry’s growth of 40.7% and against the Medical sector’s decline of 7.2%. The S&P Index has climbed 28.6% in the same time frame.

Zacks Investment ResearchImage Source: Zacks Investment Research

Style Score

Acadia Healthcare is well-placed for progress as evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all the three factors. 

Robust Prospects

The Zacks Consensus Estimate for Acadia Healthcare’s 2022 earnings suggests growth of 14.4% from the prior-year figure while the same for revenues indicates an improvement of 7.4%.

Positive Estimate Revision

The Zacks Consensus Estimate for 2022 earnings has been revised upward by 0.7% in the past 60 days.

Impressive Earnings Surprise History

Acadia Healthcare boasts an impressive earnings surprise record. It has surpassed earnings estimates in three of the trailing four quarters but met once, the average surprise being 20.23%.

Business Tailwinds

Acadia Healthcare’s revenues continue to be driven by numerous buyouts and collaborations. These allow the healthcare provider to inaugurate new facilities or expand existing facilities. Apart from boosting revenues, these growth-related initiatives have not only bolstered the company’s healthcare network but also empowered it to expand in the communities struggling with inaccessibility to care. As of Sep 30, 2021, ACHC Healthcare’s portfolio comprised 230 behavioral healthcare facilities across 40 states and Puerto Rico.

Robust demand for behavioral healthcare services due to continued incidence of mental health issues in the United States is expected to continue benefiting Acadia Healthcare’s revenues in the days ahead. For 2021, revenues are projected in the range of $2.295-$2.315 billion. The mid-point of the newly provided guidance suggests 10.3% growth from the prior-year figure. Also, the mid-point meets the Zacks Consensus Estimate of $2.31 billion.

Acadia Healthcare’s numerous JVs with renowned U.S. healthcare systems also require a special mention. With 16 JVs in place, some of the recent ones include those with Minnesota-based Fairview Health Services, Colorado-based SCL Health and Florida-based Orlando Health. ACHC remains positive about 2022, which is likely to be the company’s strongest year with respect to JVs.

To intensify focus on its core and more profitable U.S. business, Acadia Healthcare divested its underperforming U.K. operations to Waterland Private Equity in the beginning of 2021. Apart from concentrating on profitable businesses, the sell-off was also utilized for repaying debts, thereby reducing the mounting interest expense. It seems that the transaction bore fruit for Acadia Healthcare as its total debt load had gone down remarkably as of Sep 30, 2021 from 2020-end level. Consequently, interest expenses tumbled 48.1% in the first nine months of 2021 from the prior-year comparable period.

Availability of cash reserves, coupled with adequate cash-generating abilities enable Acadia Healthcare to pursue uninterrupted business investments. ACHC had $500 million available under its $600-million revolving credit facility as of Sep 30, 2021.

Stocks to Consider

Some better-ranked stocks from the medical space include Corbus Pharmaceuticals Holdings, Inc. CRBP, Molina Healthcare, Inc. MOH and Repligen Corporation RGEN, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Corbus Pharmaceuticals’ earnings surpassed The Zacks Consensus Estimate in three of the last four quarters but missed once, the average surprise being 29.89%. The Zacks Consensus Estimate for Corbus Pharmaceuticals’ 2022 earnings implies 13% growth from the prior-year figure. The consensus mark has also moved north by 14.3% in the past 60 days. CRBP has a Momentum Score of A.

Molina Healthcare has a trailing four-quarter surprise of 4.00%, on average. The Zacks Consensus Estimate for Molina Healthcare’s 2022 earnings indicates 27.3% improvement from the prior-year figure while the same for revenues suggests 12% rise from the prior-year figure. The expected long-term earnings growth rate pegged at 21.1% is better than the industry’s average of 15%.  MOH boasts of a VGM Score of B.

The bottom line of Repligen outpaced The Zacks Consensus Estimate in each of the last four quarters, the average being 49.21%. The Zacks Consensus Estimate for Repligen’s 2022 earnings suggests 10.8% improvement from the prior-year figure. The consensus mark has moved north by 2.9% in the past 60 days. RGEN has a Momentum Score of B.

While Corbus Pharmaceuticals stock has lost 51.7% in a year, shares of Molina Healthcare and Repligen have rallied 50.8% and 36.2%, respectively, in the same time frame.

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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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