Acadia Healthcare (ACHC) this year became the largest provider of inpatient behavioral health care services, including psychiatric and chemical dependency treatment, in both the US and the UK. They also run therapeutic school-based programs to address substance abuse and mental health risks for our most vulnerable citizens.

And the stock just broke above a 3-month consolidation between $66 and $74 that included a secondary offering of 4.5 million shares. This demonstrates strong demand for the company's growth story.

Maintaining a solid Zacks Rank of #2 or better most of the past year, there are two primary reasons that propel analysts to keep raising earnings estimates: strong organic and acquisitive growth in a specialty area of healthcare with solid trends.

Specialty Care Trends

With a mix of inpatient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs Acadia Healthcare has a comprehensive approach to helping people overcome debilitating mental and substance abuse issues.

Clearly this is an area in our society that is seeing more patients and greater need for quality care, not less. And through the acquisition of over 2,500 beds in over two dozen facilities in the past year, Acadia has become the largest provider of these specialty services in the US and the UK.

Revenue Growth Path

Here's a snapshot of the top line growth for Acadia...

And here's what Jefferies analyst had to say in June about this revenue growth path (courtesy of StreetInsider.com)...

Jefferies reiterates a Buy rating and $88.00 price target on Acadia Healthcare following Jefferies Healthcare Conference. Analyst Brian Tanquilut believes that ACHC wll double its revenue to $4 billion in 3 years.

Tanquilut commented, "We walked away from the fireside chat we hosted with ACHC CEO Joey Jacobs and President Brent Turner with an even more bullish view on the name given our belief that the company will be able to grow its revenue run-rate from ~$2B at year-end 2015 to ~$4B by year-end 2018. Strong service demand and market share gains should enable ACHC to drive 8%-10% organic growth, while a strong M&A pipeline should yield consistent deal flows over the next few years."

The ACA Tailwind Remains

With the recent Supreme Court decision to uphold the Affordable Care Act as the law of the land, healthcare providers, insurers, and patients have regained some degree of certainty about what the next few years will look like regarding care and how it gets paid for.

The level of certainty for hospitals was confirmed when stocks like Tenet Health (THC) and HCA Holdings (HCA) soared last week on the SCOTUS vote.

And on July 3, Aetna (AET) and Humana (HUM) entered into a definitive agreement under which Aetna will acquire all outstanding shares of Humana for a combination of cash and stock valued at $37 billion or approximately $230 per Humana share

Last year, Baird analysts had this to say about Acadia's business model within that larger landscape of healthcare...

"Skeptics nitpick the substance abuse subsector as 'non core,' but we think that is short-sighted and ignores an expanding addressable market supported by numerous policy tailwinds (similar themes to inpatient psych). ACHC remains one of our top growth ideas."

The analysts recently reiterated ACHC as one of their top growth ideas.

Institutions Check In

One of my primary catalysts for stock selection in the Zacks Follow the Money (FTM) Trader is institutional buying. When we originally bought shares in July 2014 we did so because of strong net institutional buying in Q1 of last year.

That pattern has continued in the past 4 quarters with many new buyers as well as existing holders adding to, not taking profits on, their positions. Of note in Q1 of 2015, which saw 12% net accumulation, was the giant Wellington Management adding 895,000 shares to bring their haul to over 4 million.

The 13Fs for Q2 should reveal many more names who were gobbling up shares between $66 and $74 after the recent secondary. My sense is that many of them imagine holding ACHC long-term until shares are well into the $90s.

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