Acadia Healthcare Company, Inc.'s (NASDAQ:ACHC) Popularity With Investors Is Clear

When close to half the companies in the Healthcare industry in the United States have price-to-sales ratios (or "P/S") below 1.2x, you may consider Acadia Healthcare Company, Inc. (NASDAQ:ACHC) as a stock to potentially avoid with its 2.4x P/S ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the elevated P/S.

Check out our latest analysis for Acadia Healthcare Company

How Has Acadia Healthcare Company Performed Recently?

Recent revenue growth for Acadia Healthcare Company has been in line with the industry. Perhaps the market is expecting future revenue performance to improve, justifying the currently elevated P/S. However, if this isn't the case, investors might get caught out paying too much for the stock.

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Acadia Healthcare Company.

Do Revenue Forecasts Match The High P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as high as Acadia Healthcare Company's is when the company's growth is on track to outshine the industry.

If we review the last year of revenue growth, the company posted a worthy increase of 10%. The latest three year period has also seen an excellent 38% overall rise in revenue, aided somewhat by its short-term performance. Accordingly, shareholders would have definitely welcomed those medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 11% per year during the coming three years according to the eleven analysts following the company. With the industry only predicted to deliver 7.4% per year, the company is positioned for a stronger revenue result.

In light of this, it's understandable that Acadia Healthcare Company's P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

The Bottom Line On Acadia Healthcare Company's P/S

While the price-to-sales ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of revenue expectations.

As we suspected, our examination of Acadia Healthcare Company's analyst forecasts revealed that its superior revenue outlook is contributing to its high P/S. It appears that shareholders are confident in the company's future revenues, which is propping up the P/S. Unless these conditions change, they will continue to provide strong support to the share price.

Plus, you should also learn about this 1 warning sign we've spotted with Acadia Healthcare Company.

If you're unsure about the strength of Acadia Healthcare Company's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.