On Tuesday, TD Cowen adjusted its outlook on Acadia Healthcare (NASDAQ: NASDAQ:ACHC), reducing the price target from $101.00 to $91.00. Despite this change, the firm maintained its Buy rating on the company's stock. The adjustment was made in light of a slower-than-expected start to the year, prompting a revision of revenue and earnings forecasts.
The firm's analyst cited a tempered expectation for patient day revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization), projecting a lower than anticipated performance in the early part of the year. The forecast for EBITDA-NCI (Earnings Before Interest, Taxes, Depreciation, and Amortization - Net of Controlling Interests) for the years 2024 and 2025 was revised downwards from $758 million and $854 million to $740 million and $829 million, respectively.
Despite the reduced financial projections, TD Cowen's stance on Acadia Healthcare remains positive, with expectations of strong secular demand for behavioral services. The firm also anticipates revenue and bed acceleration in the second half of 2024, which supports the continuation of the Buy rating.
The lowered price target also reflects a slight adjustment in valuation multiples, with the 2025E target multiple being decreased from 13 times to 12.5 times. This change in the multiple is directly tied to the revised price target for Acadia Healthcare's shares.
Acadia Healthcare, a leading provider of behavioral healthcare services, has been navigating the challenges of the industry while striving to meet the growing demand for its services. The updated figures from TD Cowen provide investors with a recalibrated expectation for the company's financial trajectory over the next couple of years.
InvestingPro Insights
As TD Cowen adjusts its outlook on Acadia Healthcare, key metrics from InvestingPro provide additional context for investors. Acadia's market capitalization stands at $6.36 billion, with a forward-looking P/E ratio for the last twelve months as of Q1 2024 at a modest 6.04, suggesting that the stock may be undervalued if the company meets its future earnings expectations. Notably, the company has experienced a revenue growth of 10.92% over the last twelve months, indicating an expanding business despite the recent price target adjustment by analysts.
InvestingPro Tips highlight that while analysts have revised earnings downwards for the upcoming period, they also predict Acadia will be profitable this year. Additionally, the stock is trading near its 52-week low, presenting a potential entry point for long-term investors considering the company's strong return over the last five years. It's worth mentioning that Acadia does not pay a dividend to shareholders, which may be a consideration for income-focused investors.
For those seeking a deeper analysis, InvestingPro offers additional tips to evaluate Acadia's potential further. Subscribers can access these insights and more by visiting https://www.investing.com/pro/ACHC. Plus, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With a total of 9 additional InvestingPro Tips available, investors can gain a comprehensive understanding of Acadia Healthcare's investment profile.
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