Acadia Healthcare Company, Inc.

ACHC Details

Acadia Healthcare Company, Inc. (NASDAQ: ACHC) is engaged in developing and operating inpatient psychiatric facilities, residential treatment centers, specialty treatment facilities, and providing outpatient behavioral healthcare services. The company acquires and improves health care accommodations in the US and Puerto Rico. As of March 31, 2021, ACHC operated 228 behavioral healthcare facilities with approximately 10,000 beds in 40 states and Puerto Rico. On January 19, 2021, the company sold its U.K. operations to RemedcoUK Limited. The company received payments from the following payors for services offered in its facilities: 1) Medicaid and other programs provided by state governments, 2) Commercial insurers, 3) Medicare programs provided by the federal government, and 4) Self-paying patients and clients. As of June 11, 2021, the company’s market capitalization stood at USD 6.02 billion.

Joint-venture for Expansion: On March 30, 2021, the company announced its joint-venture with Geisinger Health to build two new facilities, each with 96 beds in Northeastern and Central Pennsylvania. The company expects its first accommodation to open in 2022, and the second one in 2023.

Q1FY21 Results: The company reported an 8.24% rise in revenues to USD 551.19 million in Q1FY21 (ending March 31, 2021) compared to USD 509.21 million in Q1FY20. However, net income declined 69.24% to USD 10.47 million in Q1FY21 compared to USD 34.06 million in Q1FY20, primarily due to loss incurred from discontinued U.K operations. The company had cash and cash equivalents of USD 178.91 million with a total debt of 1,528 million as at end of the period.

Revenue Mix (Source: Company Presentation, March 02, 2021)

Key Risks:  Revenues from the states of Pennsylvania, California, Arizona, and Tennessee accounted for approximately 12%, 8%, 6%, and 6% respectively of the total revenues in FY20. Any change in the economic conditions in these key areas, such as regulatory, economic, environmental, and competition or any natural disasters, could affect the company’s operations and financial conditions.

Outlook: For FY21, the company expects its revenues to be in the range of USD 2.24 billion to USD 2.29 billion, with adjusted EBITDA in between USD 500 million to USD 530 million. The company is also estimating its adjusted earnings per diluted share to be in the range of USD 2.30 to USD 2.55.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ACHC Daily Technical Chart

Stock Recommendation: ACHC’s share price has surged by 162.68% in the past twelve months and is currently trading at a higher end of the 52-week range of USD 23.63 to USD 67.33. The stock is currently trading far above its 200 DMA levels. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 56.47. Considering the significant increase in the stock price in the past twelve months, robust fundamentals, reasonable balance sheet, associated risks, and current valuation, we recommend an “Expensive” rating on the stock at the closing price of USD 67.80, up by 1.03% as of June 11, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

Progyny, Inc.

PGNY Details

Progyny, Inc. (NASDAQ: PGNY) is specialized in providing fertility and family building benefits solutions in the US. The company generates its revenues through two segments viz 1) Fertility Benefits Solutions (FBS), which provides access to efficient treatments through a proprietary developed Smart Cycle plan. Revenue is recognized when the Smart Cycle is completed for any member, and 2) Pharmacy Benefits Solutions (PBS), which generates revenue primarily through the utilization of Progyny Rx, which provide members access to medication requirement during their fertility treatment. As of March 31, 2021, the company served 2.7 million members. As of June 11, 2021, the company’s market capitalization stood at USD 5.66 billion.

Growth in Clients and Covered Lives (Source: Overview Presentation, May 2021)

Q1FY21 Results: The company recorded a significant rise of 50.73% in revenue to USD 122.13 million in Q1FY21 (ending March 31, 2021) compared to USD 81.02 million in Q1FY20 (ending March 31, 2020), primarily due to an increase in the number of clients and covered lives. The FSB segment contributed 72.75%, while the PBS segment contributed 27.25% of the total revenues in Q1FY21. In addition, the company reported a 3.17x YoY increase in net income to USD 15.16 million in Q1FY21 compared to USD 3.62 million in Q1FY20. As of March 31, 2021, the company stood at the cash and cash equivalents of USD 29.82 million with no outstanding debt.

Key Risks: For FY20, two clients of the company accounted 18% and 17% of the total revenue. For FY19, the company's three clients accounted 16%, 15%, and 10% of the total revenue. The concentration of business with certain customers can potentially hurt the company’s financials.

Outlook: For FY21, the company expects its revenues to be in the range of USD 520 million to USD 540 million and net income to range between USD 34.30 million to USD 42.20 million. For Q2FY21, the company projects its revenues to be in the range of USD 126 million to USD 131 million and net income to range between USD 6.50 million to USD 8.8 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

PGNY Daily Technical Chart

Stock Recommendation: PGNY’s share price has increased by 192.01% in the past twelve months and is currently trading at a higher end of the 52-week range of USD 21.21 to USD 65.65. The stock is currently trading far above its 200 DMA levels. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 55.38. Considering the significant rise in the stock price in the past twelve-month, continuous increment in the number of clients and cover lives, associated risks, and current valuation, we recommend an "Expensive” rating on the stock at the closing price of USD 63.98, down by 0.03% as of June 11, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.