Acadia Healthcare Company, Inc. (ACHC) stock intrinsic value fair value estimate & owner earnings analysis

Acadia Healthcare runs 277 behavioral health facilities with over 12,500 beds in 40 states and Puerto Rico: inpatient psychiatric hospitals, addiction treatment centers and opioid treatment clinics. Revenue was $3.31 billion in 2025 (up 5.0%), 57.7% of it from Medicaid, 24.6% from commercial insurers and 14.3% from Medicare. No single facility is more than 4% of revenue. How we measure earnings. We start from operating cash flow and subtract working-capital swings, stock compensation and maintenance capital spending. Acadia states that routine maintenance spending is about 3% of revenue ($104.4 million in 2025); the far larger spending on new hospitals and added beds ($467.4 million in 2025) is treated as growth spending, not upkeep. Large legal settlements are charged in the year they are recorded, not the year cash leaves: the $394.2 million Desert Hills charge falls in 2023 (paid $400.0 million in January 2024) and the $147.5 million securities-class-action charge falls in 2025 (net of a $31.5 million insurance receivable). On that basis owner earnings per share were about $3.19 (2021), $3.53 (2022), -$0.87 (2023), $4.29 (2024) and $0.05 (2025). 2020 ($5.86) is excluded as distorted by pandemic-era cash timing, and pre-2021 years include the UK business that was sold, so they describe a different company. Why the recent level is below the historical median. The five-year median is about $3.19, but it is drawn partly from years with lower interest cost and no large government-investigation spending. Interest expense rose from $116.4 million in 2024 to $138.9 million in 2025 on total debt of about $2.5 billion, government-investigation costs were $135.3 million (versus $30.6 million), and the company added $52.7 million to professional-liability reserves. Adding back the securities settlement, 2025 was roughly $1.3 per share, and the first quarter of 2026 (operating cash flow $61.5 million versus $11.5 million a year earlier, capital spending $76.6 million versus $174.6 million) points to a similar run rate of roughly $1.3 to $1.5. We therefore start the base case at $1.45 per share rather than at the historical median. Growth check: owner earnings fell about 99% in 2025 ($0.05 versus $4.29); the first-year figure of $1.45 rises from that base because $116 million of the 2025 shortfall was a one-time settlement charge, which the filing dates to November 2025 and which was accrued and not repeated. Base case: about $38.70 per share. Growth credited is limited to what is already paid for: in 2025 Acadia opened one wholly owned facility and five joint-venture facilities and added beds to existing hospitals (1,089 beds added, 382 closed), and 2024 was similarly active. These beds are still ramping, so earnings before legal costs are assumed to climb from $1.45 to $2.80 by year five, still below the $4.29 earned in 2024 before higher interest. After that we credit 2.5% a year, below the 2.8% revenue-per-patient-day growth of 2025 and the 4.3% of 2024. We charge $0.60 per share a year for recurring legal and settlement costs from 2027, roughly half the average of the last five years (about $580 million was resolved in the last two large cases alone). After year ten we hold earnings flat, on the basis that the existing facilities persist and are maintained at roughly 3% of revenue. New hospital openings not yet started, share gains and margin recovery are left out. Bear case: about $10.50 per share. In its 2025 10-K the company disclosed that a federal grand jury, through subpoenas issued by the Department of Justice Criminal Division, and the SEC are investigating the acute-care service line's admissions, length-of-stay and billing practices, and the company says it cannot estimate any liability. We assume a resolution costing $580 million (the sum of the Desert Hills payment and the securities settlement) in 2027, recurring legal costs of $0.90 per share a year, new-facility ramp stalling at $2.00 per share before legal costs, and higher interest as the $450 million of 5.5% notes due 2028 are refinanced near the 7.375% paid on the 2033 notes. Leverage of about $2.5 billion is what makes this case thin. Bull case: about $62.60 per share. Newly opened beds ramp to about $3.90 per share before legal costs by year five, close to the $4.29 earned in 2024 less higher interest, then 3% growth. The government matters resolve small, as the 2017 civil investigation did ($19.9 million paid in 2024), leaving $0.30 per share a year of legal costs. What would make this wrong: a larger-than-assumed outcome from the disclosed investigations; continued cost pressure (salaries were 54.0% of revenue in 2025 versus 52.4%); rising receivable days (49 versus 43), which suggest payor delays; or state Medicaid budget cuts given the 57.7% Medicaid mix. In 2025 the company also wrote off $996.2 million of goodwill, an acknowledgement that past acquisitions are worth less than paid; this is a non-cash charge and does not change the cash earnings, but it is a caution on the returns from earlier deals. Debt is not subtracted separately; its interest cost is already in the earnings. The margin-of-safety price of $16.00 keeps a wide margin below the base case because the outcome of the investigations is unknown.