Partnerships With Henry Ford Health And Intermountain Health Will Expand Future Patient Reach

Key Takeaways

• Strategic expansion and partnerships aim to drive revenue growth and expand patient reach through increased capacity and new health system collaborations.
  
• Focus on technology and workforce initiatives should enhance operational efficiency and improve net margins through better care coordination and labor cost management.
  
• Media scrutiny and legal investigations could undermine trust and referrals, impacting revenues and escalating potential legal costs and earnings pressure.

Catalysts

Provides behavioral healthcare services in the United States and Puerto Rico.

• Acadia Healthcare is set to expand its capacity significantly by investing billions of dollars in constructing over 2,000 new beds over the next two years, which is expected to drive volume growth and increase revenue.
  
• The company is improving recruitment, retention, and engagement, which can favorably impact labor costs and improve net margins.
  
• Investments in technology, such as electronic medical records and remote patient monitoring systems, are aimed at enhancing care coordination and operational efficiency, potentially increasing net margins.
  
• Upcoming partnerships and joint ventures with well-regarded health systems, such as Henry Ford Health and Intermountain Health, could expand patient reach and drive revenue growth.
  
• The expected retroactive approval of the Tennessee supplemental payment program is anticipated to contribute positively to Acadia's earnings.

Acadia Healthcare Company Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Acadia Healthcare Company's revenue will grow by 9.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.0% today to 9.7% in 3 years time.
• Analysts expect earnings to reach $391.7 million (and earnings per share of $4.18) by about February 2028, up from $280.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 17.7x on those 2028 earnings, up from 13.5x today. This future PE is lower than the current PE for the US Healthcare industry at 24.3x.
• Analysts expect the number of shares outstanding to grow by 0.12% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.64%, as per the Simply Wall St company report.

Acadia Healthcare Company Future Earnings Per Share Growth

Risks

• Recent media scrutiny and legal investigations into Acadia's behavioral health facilities could undermine patient trust and slow down referral volumes, negatively impacting future revenue streams.
  
• There is uncertainty surrounding the potential for future legal costs and settlements, which may adversely affect earnings and net margins.
  
• The temporary reduction in referral volume growth from key sources, if prolonged, could indicate deeper issues, risking sustained lower patient volumes and decreasing revenue.
  
• The plan to increase bed capacity faces execution risks, and the potential delays or increased costs could affect capital expenditure plans and future earnings growth.
  
• Any prolonged decrease in patient referrals or volume growth might lead to facility closures or restructuring, which could impact the company's revenue and operational costs.

Valuation

• The analysts have a consensus price target of $61.385 for Acadia Healthcare Company based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $78.0, and the most bearish reporting a price target of just $43.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.0 billion, earnings will come to $391.7 million, and it would be trading on a PE ratio of 17.7x, assuming you use a discount rate of 6.6%.
  
• Given the current share price of $40.67, the analyst price target of $61.38 is 33.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.