DaVita Inc (DVA, Financial) experienced a daily loss of -3.48%, and a modest 3-month gain of 2%. With an Earnings Per Share (EPS) of 5.03, the question arises: Is DaVita's stock modestly undervalued? This article offers an in-depth valuation analysis of DaVita, providing valuable insights for potential investors. Read on to discover more about DaVita's financial performance and intrinsic value.
Company Overview
DaVita is the leading provider of dialysis services in the U.S., holding a market share exceeding 35% in terms of patients and clinics. Operating over 3,000 facilities globally, DaVita treats over 240,000 patients annually. The company's U.S. sales are primarily driven by government payers, particularly Medicare, accounting for about two-thirds of the total. Commercial insurers, despite representing only about 10% of the U.S. patients treated, generate nearly all of DaVita's U.S. dialysis business profits. DaVita's stock price currently stands at $100.66, with a market cap of $9.20 billion, and a fair value (GF Value) of $128.19.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor derived from past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides a snapshot of the stock's fair trading value. If the stock price significantly deviates from the GF Value Line, it indicates that the stock is either overvalued or undervalued, potentially impacting its future return.
According to GuruFocus Value calculation, DaVita (DVA, Financial) appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Assessing the financial strength of a company is crucial before investing. Companies with weak financial strength pose a higher risk of permanent loss. DaVita's cash-to-debt ratio stands at 0.03, which is lower than 93.22% of companies in the Healthcare Providers & Services industry. This indicates that DaVita's financial strength is relatively weak, scoring 4 out of 10.
Profitability and Growth
DaVita's profitability and growth are key factors in its valuation. The company has been profitable for 10 out of the past 10 years, with a revenue of $11.70 billion and an Earnings Per Share (EPS) of $5.03 over the past twelve months. Its operating margin is 10.73%, ranking better than 74.31% of companies in the Healthcare Providers & Services industry. The 3-year average annual revenue growth of DaVita is 17.8%, ranking better than 71.33% of its industry peers, while the 3-year average EBITDA growth rate is 13.5%, ranking better than 56.49% of the industry.
ROIC vs WACC
Comparing the return on invested capital (ROIC) and the weighted average cost of capital (WACC) is another effective way to evaluate a company's profitability. DaVita's ROIC is 6.3, and its WACC is 5.26, indicating a positive return on invested capital.
Conclusion
In conclusion, DaVita (DVA, Financial) appears to be modestly undervalued. Despite its poor financial condition, the company exhibits strong profitability and growth, outperforming 56.49% of companies in the Healthcare Providers & Services industry. For a more comprehensive understanding of DaVita's financials, you can check out its 30-Year Financials here.
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