Yahoo Finance There's Been No Shortage Of Growth Recently For Acadia Healthcare Company's (NASDAQ:ACHC) Returns On Capital
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Acadia Healthcare Company (NASDAQ:ACHC) and its trend of ROCE, we really liked what we saw.
What Is Return On Capital Employed (ROCE)?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Acadia Healthcare Company:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.097 = US$446m ÷ (US$5.0b - US$388m) (Based on the trailing twelve months to December 2022).
Thus, Acadia Healthcare Company has an ROCE of 9.7%. On its own, that's a low figure but it's around the 9.4% average generated by the Healthcare industry.
See our latest analysis for Acadia Healthcare Company
Above you can see how the current ROCE for Acadia Healthcare Company compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Acadia Healthcare Company here for free.
So How Is Acadia Healthcare Company's ROCE Trending?
Acadia Healthcare Company has not disappointed in regards to ROCE growth. The figures show that over the last five years, returns on capital have grown by 34%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, Acadia Healthcare Company appears to been achieving more with less, since the business is using 24% less capital to run its operation. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.
Our Take On Acadia Healthcare Company's ROCE
From what we've seen above, Acadia Healthcare Company has managed to increase it's returns on capital all the while reducing it's capital base. Since the stock has returned a solid 77% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
Like most companies, Acadia Healthcare Company does come with some risks, and we've found 1 warning sign that you should be aware of.
While Acadia Healthcare Company isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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