On Friday, Mizuho Securities adjusted its stance on Acadia Healthcare (NASDAQ:ACHC), reducing the company's price target to $70 from the previous $84 while maintaining a Neutral rating on the stock. The adjustment follows the healthcare provider's first-quarter results for 2024, which revealed trends that did not meet expectations.
The firm's analyst cited the timing of the Easter holiday and the launch of government facilities in crucial military specialty markets as primary factors that negatively influenced admissions during the quarter. These developments led to a revenue and admission shortfall for Acadia Healthcare.
As a result of the quarterly performance, the analyst believes that Acadia Healthcare no longer warrants a premium valuation in the market. The new price target of $70 is derived from an 11 times multiple of the expected 2024 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which is at the higher end of the historical average for non-acute care facility-based companies.
The firm's revised estimates span from 2024 to 2026, indicating a recalibration of expectations for Acadia Healthcare's financial outlook in the coming years. Despite the reduced price target, the Neutral rating suggests that the firm maintains a stance of neither bullish nor bearish on the stock's future performance.
InvestingPro Insights
Following the recent assessment by Mizuho Securities, Acadia Healthcare's (NASDAQ:ACHC) latest financial data and market performance provide additional context for investors. The company's market capitalization stands at approximately $6.17 billion, with a forward-looking P/E ratio for the next twelve months as of Q1 2024 at 5.92, reflecting expectations of future profitability. Despite the stock's recent downturn, with a 9.32% decline in the past week, analysts predict that net income is expected to grow this year, which may signal a potential rebound in the stock's valuation.
InvestingPro Tips indicate that Acadia Healthcare is currently trading near its 52-week low and the Relative Strength Index (RSI) suggests the stock is in oversold territory. These factors could interest value investors looking for entry points in healthcare stocks that may be poised for recovery. Moreover, the company does not pay a dividend, which could be relevant for income-focused investors.
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