Acadia Healthcare Company, Inc. (NASDAQ:ACHC) Analysts Are Reducing Their Forecasts For This Year

The latest analyst coverage could presage a bad day for Acadia Healthcare Company, Inc. (NASDAQ:ACHC), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. At US$55.24, shares are up 6.6% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

After this downgrade, Acadia Healthcare Company's nine analysts are now forecasting revenues of US$2.3b in 2021. This would be a solid 8.9% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to bounce 39% to US$2.22. Before this latest update, the analysts had been forecasting revenues of US$3.2b and earnings per share (EPS) of US$2.66 in 2021. Indeed, we can see that the analysts are a lot more bearish about Acadia Healthcare Company's prospects, administering a pretty serious reduction to revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for Acadia Healthcare Company

The average price target climbed 7.2% to US$55.50 despite the reduced earnings forecasts, suggesting that this earnings impact could be a positive for the stock, once it passes. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Acadia Healthcare Company at US$68.00 per share, while the most bearish prices it at US$32.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Acadia Healthcare Company's rate of growth is expected to accelerate meaningfully, with the forecast 8.9% annualised revenue growth to the end of 2021 noticeably faster than its historical growth of 5.1% p.a. over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 7.1% per year. Acadia Healthcare Company is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. The increasing price target is not intuitively what we would expect to see, given these downgrades, and we'd suggest shareholders revisit their investment thesis before making a decision.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Acadia Healthcare Company analysts - going out to 2023, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

This article by Simply Wall St is general in nature. 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.

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