Returns At Acadia Healthcare Company (NASDAQ:ACHC) Are On The Way Up

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Acadia Healthcare Company (NASDAQ:ACHC) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Acadia Healthcare Company:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.095 = US$423m ÷ (US$4.9b - US$442m) (Based on the trailing twelve months to June 2022).

Thus, Acadia Healthcare Company has an ROCE of 9.5%. On its own, that's a low figure but it's around the 11% average generated by the Healthcare industry.

View our latest analysis for Acadia Healthcare Company

Above you can see how the current ROCE for Acadia Healthcare Company compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Can We Tell From Acadia Healthcare Company's ROCE Trend?

Acadia Healthcare Company has not disappointed in regards to ROCE growth. The data shows that returns on capital have increased by 29% over the trailing five years. The company is now earning US$0.1 per dollar of capital employed. Speaking of capital employed, the company is actually utilizing 25% less than it was five years ago, which can be indicative of a business that's improving its efficiency. Acadia Healthcare Company may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

In Conclusion...

In a nutshell, we're pleased to see that Acadia Healthcare Company has been able to generate higher returns from less capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

Acadia Healthcare Company does have some risks though, and we've spotted 2 warning signs for Acadia Healthcare Company that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.