Maintaining a Buy on Acadia Healthcare: Valuation Upside and Resilient Medium-Term Growth Despite PLGL-Driven 2025 Reset

Analyst Ryan Langston from TD Cowen maintained a Buy rating on Acadia Healthcare and decreased the price target to $22.00 from $25.00.

Ryan Langston has given his Buy rating due to a combination of factors that, in his view, outweigh the recent negative developments tied to professional and general liability (PLGL) costs. He acknowledges that the company’s latest actuarial review forced a sizable upward revision in PLGL reserves, which materially reduced 2025 EBITDA and EPS guidance and required him to trim his forward EBITDA forecasts. Despite this reset, he still projects continued EBITDA growth through 2027, indicating that the PLGL spike is largely a 2025 catch-up event rather than a structural impairment to the business. He also highlights that management expects PLGL expenses to remain elevated but more stable going forward, with fewer one-time catch-up items, which supports a more predictable earnings trajectory beyond 2025.
At the current share price, Langston believes the valuation already reflects much of the PLGL-related downside, while the updated price target of $22 still offers meaningful upside. His target is based on applying a consistent 6.9x multiple to his 2026 adjusted EBITDA estimate, indicating confidence that the core behavioral health operations remain intact and capable of delivering modest growth. He further notes that his 2026 outlook does not yet incorporate the potential upside from additional strategic development projects, which could incrementally boost earnings if executed successfully. Taken together, the combination of compressed valuation, resilient medium-term growth, and incremental optionality from new projects underpins his decision to maintain a Buy recommendation on Acadia Healthcare shares.

In another report released on January 14, RBC Capital also maintained a Buy rating on the stock with a $17.00 price target.