Acadia Healthcare Company, Inc. (ACHC): A Bull Case Theory

We came across a bullish thesis on Acadia Healthcare Company, Inc. on Value investing subreddit by Independent-Fragrant. In this article, we will summarize the bulls’ thesis on ACHC. Acadia Healthcare Company, Inc.'s share was trading at $13.05 as of January 29th. ACHC’s trailing and forward P/E were 11.25  and 6.35 respectively according to Yahoo Finance.

Acadia Healthcare Company, Inc. provides behavioral healthcare services in the United States and Puerto Rico. ACHC presents a compelling deep-value opportunity as a classic “broken growth story” currently trading at distressed levels. At $14.70 per share, the market appears to price in bankruptcy or perpetual legal liabilities, but the company is structurally far from broken. With a market cap of roughly $1.35 billion and an enterprise value of around $3.8 billion, ACHC’s adjusted EBITDA is conservatively estimated at $500–$600 million, implying an EV/EBITDA multiple of 6.3x–7.6x versus a historical average of ~12x.

Critically, management has cut 2026 capex to $300 million from $600 million, which, combined with interest obligations of ~$180 million, positions the company to generate positive free cash flow for the first time in years. This cash could repurchase up to 20% of the float, establishing a significant floor for the stock. Activist investor Engine Capital, holding a 3–5% stake, adds a potential catalyst. Their push for a strategic review, sale, or aggressive buybacks could eliminate the governance discount if board influence is secured in 2026.

While legal risks exist, including ongoing class actions such as Timberline Knolls and Southwood, the expected verdict timeline (2028–2029) allows investors to capture the 2026–2027 cash flow recovery without bearing the full burden of settlements. Historical precedents, like the $400 million Desert Hills settlement, demonstrate that resolved legal claims have minimal long-term stock impact. The broader psychiatric facility industry context further mitigates risk.

Structural demand is enduring, as governments and healthcare systems rely on specialized facilities, limiting the threat of shutdowns. Acadia’s combination of imminent free cash flow generation, activist-driven value transfer, and resilient industry positioning makes it an attractive “sin stock” deep-value play with substantial upside and limited near-term downside.

Previously, we covered a bullish thesis on Tenet Healthcare Corporation (THC) by BlackSwanInvestor in December 2024, which highlighted the company’s operational efficiency, growth in its higher-margin Ambulatory Care segment, and debt reduction. THC’s stock price has appreciated by approximately 50.74% since our coverage. Independent-Fragrant shares a similar perspective but emphasizes Acadia Healthcare Company, Inc.’s (ACHC) distressed valuation and activist-driven catalysts as key upside drivers.

Acadia Healthcare Company, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held ACHC at the end of the third quarter which was 39 in the previous quarter. While we acknowledge the potential of ACHC as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.