Behavioral Health Composite

January, 2019

Behavioral Healthcare Stocks up 22.4% in January

After a rough end to 2018, 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 up 22.4% for the month of January. The S&P 500, by comparison, was up 7.7% during the same period.

“It was a quiet month for the behavioral stocks, as there was no real news.  A 22% gain in the first month of January is certainly encouraging, but we’ll need to see several more like it to recover from the losses at the end of 2018,” said Cory Mertz, Managing Partner at Mertz Taggart.

The gain in the BHC index was mainly driven by AAC.

  • American Addiction Centers – AAC (↑48.5%) rebounded somewhat to $2.42 per share after falling dramatically in the last half of 2018 due to very disappointing performance in Q2 and Q3 of 2018, high leverage and liquidity concerns.  While the percentage increase seems significant, this is due to the fact that the starting share price number is small (share price as of 1/1/19 was $1.40).
  • Acadia Healthcare – ACHC (↑5.8%) increased slightly in the month of January.  No significant news for now.  ACHC will release its fourth quarter and year‑end 2018 earnings on February 28, 2019, after the close of the market.
  • Universal Health Services – UHS (↑12.9%) was up for the month of January.  On January 16th, UHS announced it will pay a cash dividend of $0.10 per share on March 15, 2019 to shareholders of record as of March 1, 2019.  UHS will be releasing its fourth quarter and year‑end 2018 earnings on February 27, 2019, after the close of the market.
graph displaying data for january health composite

For the last twelve months (LTM), the BHC well behind the S&P 500 at a 27.9% loss relative to the S&P’s loss of -4.2%.

graph displaying data for january health composite

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 1/31/19
AAC $2.42
ACHC $27.36
UHS $132.53

Enterprise Value/EBITDA

Company 1/31/17 1/31/18 1/31/19
AAC 13.54x 11.55x 11.65x
ACHC 12.88x 10.81x 9.52x
UHS 8.57x 9.18x 9.56x

Enterprise Value/Revenue

Company 1/31/17 1/31/18 1/31/19
AAC 1.45x 1.52x 1.15x
ACHC 2.69x 2.20x 1.87x
UHS 1.52x 1.52x 1.53x

M&A News

February 6, 2019Ideal Option, a provider of Medication-Assisted Treatment (MAT) and behavioral counseling services for individuals suffering from Opioid Use Disorder (OUD), announced today a strategic minority investment by BlueCross BlueShield Venture Partners (BCBSVP). BCBSVP invests on behalf of 33 BlueCross BlueShield entities in healthcare companies of strategic relevance to BlueCross BlueShield Plans.

January 24, 2019Beacon Specialized Living Services, Inc. (Beacon), a portfolio company of Pharos Capital Group, announced it has acquired Owakihi, Inc., (Owakihi). Founded in 1978, Owakihi is a leading Minnesota provider of home and community-based support services to individuals with intellectual and developmental disabilities (I/DD) and mental health needs, focusing on personalized care. Beacon is Michigan’s largest for-profit provider of residential healthcare services to individuals with I/DD, mental health and substance abuse disorders.

January 4, 2019TA Associates, a global growth private equity firm, announced that it has completed a strategic growth investment in Behavioral Health Works (BHW), a behavioral health services provider specializing in therapy and ancillary services for children with autism spectrum disorder and related disorders.  The company provides care across 11 states, serving approximately 1,800 clients.

December 19, 2018The Vistria Group purchased Behavioral Health Group (BHG) from Frontenac, a Chicago-based private equity firm.  BHG is a provider of outpatient substance abuse treatment services, primarily for addiction to prescription pain medication. BHG offers pharmacotherapeutic maintenance and detoxification services across 50 treatment centers in twelve states.

December 18, 2018Civitas Solutions, Inc. (Civitas) announced that it has entered into a definitive merger agreement to be acquired by funds advised by Centerbridge Partners, L.P. (Centerbridge). Under the terms of the agreement, Centerbridge will acquire all outstanding shares of Civitas common stock for $17.75 in cash per share of Civitas common stock, resulting in an enterprise value of approximately $1.4 billion. The offer price represented a 27% premium to the 30-day volume-weighted average price as of December 18, 2018.  Founded in 1980. Civitas is a provider of home- and community-based health and human services to must-serve individuals with intellectual, developmental, physical or behavioral disabilities and other special needs across 36 states.

2019-02-22T15:55:42+00:00 February 22nd, 2019|