Financial Review: American Renal Associates (ARA) versus Acadia Healthcare (ACHC)

American Renal Associates (NYSE: ARA) and Acadia Healthcare (NASDAQ:ACHC) are both medical companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, earnings, dividends, profitability, valuation and risk.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for American Renal Associates and Acadia Healthcare, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Renal Associates 0 0 4 0 3.00
Acadia Healthcare 0 6 7 0 2.54

American Renal Associates currently has a consensus target price of $20.00, indicating a potential upside of 7.53%. Acadia Healthcare has a consensus target price of $42.73, indicating a potential upside of 28.62%. Given Acadia Healthcare’s higher possible upside, analysts clearly believe Acadia Healthcare is more favorable than American Renal Associates.

Earnings & Valuation

This table compares American Renal Associates and Acadia Healthcare’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Renal Associates $749.77 million 0.78 -$380,000.00 ($0.33) -56.36
Acadia Healthcare $2.85 billion 1.02 $6.14 million $1.96 16.95

Acadia Healthcare has higher revenue and earnings than American Renal Associates. American Renal Associates is trading at a lower price-to-earnings ratio than Acadia Healthcare, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

93.3% of American Renal Associates shares are held by institutional investors. 12.6% of American Renal Associates shares are held by insiders. Comparatively, 11.1% of Acadia Healthcare shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares American Renal Associates and Acadia Healthcare’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Renal Associates -2.15% 15.80% 2.34%
Acadia Healthcare 6.07% 8.57% 3.22%

Volatility and Risk

American Renal Associates has a beta of 4.07, suggesting that its stock price is 307% more volatile than the S&P 500. Comparatively, Acadia Healthcare has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500.

Summary

Acadia Healthcare beats American Renal Associates on 9 of the 14 factors compared between the two stocks.

About American Renal Associates

American Renal Associates Holdings, Inc. is a dialysis service provider in the United States focused on joint venture (JV) partnerships with physicians. As of December 31, 2016, the Company owned and operated 214 dialysis clinics in partnership with 379 nephrologist partners treating over 14,000 patients in 25 states and the District of Columbia. The Company operates its dialysis clinics exclusively through a JV model, in which it partners primarily with local nephrologists to develop, own and operate dialysis clinics, while the providers of the majority of dialysis services in the United States operate through a combination of subsidiaries and joint ventures. It provides patient care and clinical outcomes to patients suffering from end-stage renal disease (ESRD). Its clinics offer both in center and home dialysis options to meet the needs of patients. Its clinics primarily provide in center hemodialysis treatments and ancillary items and services.

About Acadia Healthcare

Acadia Healthcare Company, Inc. is a provider of behavioral healthcare services, with operations in the United States and the United Kingdom. The Company focuses on acquiring and developing behavioral healthcare facilities. The Company operates through two segments: U.S. Facilities and U.K. Facilities. The Company is engaged in operating acute inpatient psychiatric facilities, specialty treatment facilities, residential treatment centers and facilities providing outpatient behavioral healthcare services. As of December 31, 2016, the U.S. Facilities segment included 208 behavioral healthcare facilities with approximately 8,500 beds in 39 states and Puerto Rico, and the U.K. Facilities segment included 365 behavioral healthcare facilities with approximately 8,600 beds in the United Kingdom. As of December 31, 2016, the Company had operated 573 behavioral healthcare facilities with approximately 17,100 beds in 39 states, the United Kingdom and Puerto Rico.

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