Acadia Healthcare Stock To $10?

Acadia Healthcare (ACHC) stock has fallen 9.5% during the past day, and is currently trading at $14.00. Our multi-factor assessment suggests that it may be time to sell ACHC stock. We have, overall, a pessimistic view of the stock, and a price of $10 may not be out of reach. We believe there are several things to fear in ACHC stock given its overall Weak operating performance and financial condition. Hence, despite its Low valuation, this makes the stock look Risky.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $1.3 Bil in market cap, Acadia Healthcare provides inpatient psychiatric, residential, substance abuse, outpatient behavioral healthcare, and group home services through a nationwide network of 228 facilities with around 10,500 beds.

[1] Valuation Looks Low

This table highlights how ACHC is valued vs broader market. For more details see: ACHC Valuation Ratios

[2] Growth Is Weak

• Acadia Healthcare has seen its top line grow at an average rate of 9.0% over the last 3 years
• Its revenues have grown 4.6% from $3.1 Bil to $3.3 Bil in the last 12 months
• Also, its quarterly revenues grew 4.4% to $852 Mil in the most recent quarter from $816 Mil a year ago.

This table highlights how ACHC is growing vs broader market. For more details see: ACHC Revenue Comparison

[3] Profitability Appears Weak

• ACHC last 12 month operating income was $444 Mil representing operating margin of 13.6%
• With cash flow margin of 10.3%, it generated nearly $335 Mil in operating cash flow over this period
• For the same period, ACHC generated nearly $107 Mil in net income, suggesting net margin of about 3.3%

This table highlights how ACHC profitability vs broader market. For more details see: ACHC Operating Income Comparison

[4] Financial Stability Looks Weak

• ACHC Debt was $2.4 Bil at the end of the most recent quarter, while its current Market Cap is $1.3 Bil. This implies Debt-to-Equity Ratio of 107.9%
• ACHC Cash (including cash equivalents) makes up $119 Mil of $6.4 Bil in total Assets. This yields a Cash-to-Assets Ratio of 1.9%

[5] Downturn Resilience Is Moderate

ACHC saw an impact slightly worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• ACHC stock fell 25.9% from a high of $68.26 on 2 September 2021 to $50.61 on 7 February 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 6 April 2022
• Since then, the stock increased to a high of $89.06 on 30 November 2022 , and currently trades at $14.00

 
2020 Covid Pandemic

• ACHC stock fell 66.4% from a high of $35.04 on 20 February 2020 to $11.78 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 30 October 2020

 
2008 Global Financial Crisis

• ACHC stock fell 86.7% from a high of $14.85 on 28 February 2007 to $1.98 on 10 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 13 March 2012

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read ACHC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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