DaVita Inc (DVA, Financial) experienced a daily loss of -2.71%, with a modest 3-month gain of 0.98%. The company's Earnings Per Share (EPS) stand at 5.03. But is the stock modestly undervalued? To answer this question, we delve into a comprehensive analysis of DaVita's valuation. Read on for an insightful exploration.
Company Overview
DaVita Inc is a leading provider of dialysis services in the United States, holding a significant market share of over 35%. The company operates more than 3,000 facilities worldwide, treating over 240,000 patients annually. Despite the company's current stock price of $98.39 per share and a market cap of $9 billion, our GF Value indicates that DaVita's stock appears to be modestly undervalued.
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, and future business performance estimates. The GF Value Line represents the ideal fair trading value of the stock. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
DaVita's Valuation
According to GuruFocus' calculations, DaVita (DVA, Financial) appears to be modestly undervalued. This estimation is based on historical trading multiples, past business growth, and analyst estimates of future business performance. Given its current price and market cap, DaVita's stock seems undervalued, implying that the long-term return of its stock is likely to be higher than its business growth.
DaVita's Financial Strength
Investing in companies with poor financial strength poses a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before purchasing shares. DaVita's cash-to-debt ratio stands at 0.03, ranking worse than 92.81% of 654 companies in the Healthcare Providers & Services industry. This indicates that DaVita's financial strength is poor.
Profitability and Growth
Companies with consistent profitability over the long term offer less risk to investors. DaVita has been profitable for the past 10 years, with an operating margin of 10.73%, ranking better than 73.65% of 649 companies in its industry. This indicates strong profitability. Furthermore, DaVita's average annual revenue growth is 17.8%, ranking better than 71.9% of companies in its industry. Its 3-year average EBITDA growth is 13.5%, which ranks better than 55.92% of companies in its industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is a useful way to evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. DaVita's ROIC is 6.3, while its WACC is 5.29, indicating that the company is creating value for its shareholders.
Conclusion
In conclusion, DaVita's stock appears to be modestly undervalued. The company's financial condition is poor, but its profitability is strong. Its growth ranks better than 55.92% of companies in the Healthcare Providers & Services industry. For more information about DaVita stock, check out its 30-Year Financials here.
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