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Behavioral Health Composite – August 2019

Updated: Jun 9, 2023

Behavioral Healthcare Stocks down 20.1% in August

The Behavioral Health Composite, which tracks investor interest in the three public behavioral healthcare companies – Acadia Healthcare (ACHC), American Addiction Centers (AAC), and Universal Health Services (UHS) –was down 20.1% for the month. The S&P 500, by comparison, was down 1.8% during the same period.

The BHC index declined to result from:

  • American Addiction Centers – AAC (↓39.0%) stock price dropped significantly after an up month in July. July stocks were up in anticipation of the NYSE’s approval of the AAC’s plan to regain compliance with rules about share price and market cap. In August, shares of AAC were trading below $1 again, but the company projected positive changes in the back half of 2019. The company plans to use the proceeds from real estate sales to pay off at least $100 million of debt by the end of the year and is considering proposals from third-party investment firms.

  • Acadia Healthcare – ACHC (↓17.2%) declined in August, one month after the company shared its latest earnings report, which showed that ACHC beat quarterly estimates ($0.59 per share) at $0.61 per share. The report reflected an increase in revenues, which were offset by a higher increase in expenses.

  • Universal Health Services – UHS (↓4.2%) had a down month after a strong July. But UHS stock outlook remains strong for the back half of 2019. In August, UHS stocks were the closest on trend to the S&P 500 when compared to the remainder of the BHC.

For the last twelve months (LTM), the BHC lags well behind the S&P 500 at a -24.2% loss while the S&P held at +0.2%.

Valuation – Public Comps

Below are the Enterprise Value / EBITDA and Enterprise Value / Revenue ratios for AAC, ACHC, and UHS. The valuations provide a relative barometer for what smaller companies can expect. Given the higher relative risk of smaller companies (e.g., less liquidity, smaller revenue base), we typically (though not always) see multiples that are lower than those of the public companies.

Stock Prices

Company 8/30/19

AAC $0.60

ACHC $26.46

UHS $144.58

Enterprise Value/EBITDA

Company 8/30/17 8/30/18 8/30/19

AAC 16.45x 12.30x N/A

ACHC 13.27x 11.75x 11.65x

UHS 8.44x 9.39x 10.31x

Enterprise Value/Revenue

Company 8/30/17 8/30/18 8/30/19

AAC 1.41x 1.55x 1.55x

ACHC 2.56x 2.29x 2.00x

UHS 1.42x 1.52x 1.56x

M&A News

August 5, 2019 Kadiant, an organization that provides high-quality Applied Behavior Analysis (ABA) therapy and other services to individuals diagnosed with autism spectrum disorder (ASD), announced that it has partnered with Behavioral Education for Children with Autism (BECA), a provider of ABA services in centers and school-based settings. BECA is the fifth ABA practice to join Kadiant since its founding in early 2019. BECA was founded in 2001 by Dr. Tracy Guiou to meet the growing need for behavior analytic services in Southern California. This partnership expands Kadiant’s services into Southern California for the first time.

August 5, 2019 – Formation Capital and Safanad Limited announced the sale of their portfolio company, RHA Health Services LLC to Blue Wolf Capital. RHA is a comprehensive provider of services to individuals with intellectual and developmental disabilities (I/DD), behavioral health needs, and substance use challenges. RHA has operations in Georgia, Florida, North Carolina, and Tennessee, serving 25,000 people each year across 440+ locations.

August 25, 2019 – Vizion Health, LLC assumed co-management with Focus Treatment Centers in Chattanooga, Tennessee. Vizion is a privately owned healthcare company in Charlotte, NC. Focus is a 48 bed residential center for substance abuse and eating disorder treatment, offering care ranging from detox to outpatient services.

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