Acadia Healthcare's (ACHC) outlook has improved after management clarified concerns around bad debt following its recent earnings call, RBC Capital Markets said in a Friday note.

The brokerage said in a Friday note that the sharp post-earnings selloff was an "overreaction" and that management's follow-up comments walked back earlier "broad-based" bad debt concerns. It added that the issue is instead "not broad-based across payer types or geographies, but rather isolated to a small number of geographies and specific payors."

RBC also pointed to potential upside from Florida supplemental payments, which are not yet included in guidance.

The brokerage said it is "incrementally more comfortable in ACHC's positioning" given management's focus on operational discipline and added resources to address denial and bad debt issues.

RBC raised its price target to $31 from $28 while maintaining an outperform rating.

Shares of Acadia were up nearly 2% in Monday trading.

Price: 28.39, Change: +0.54, Percent Change: +1.94