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Is DaVita HealthCare (DVA) Stock Undervalued Right Now?

Zacks Equity Research
·3 min read

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

DaVita HealthCare (DVA) is a stock many investors are watching right now. DVA is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock holds a P/E ratio of 12.57, while its industry has an average P/E of 20.51. Over the last 12 months, DVA's Forward P/E has been as high as 15.61 and as low as 10.27, with a median of 12.65.

We also note that DVA holds a PEG ratio of 1.32. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. DVA's PEG compares to its industry's average PEG of 1.99. Over the last 12 months, DVA's PEG has been as high as 1.59 and as low as 0.47, with a median of 0.60.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. DVA has a P/S ratio of 0.91. This compares to its industry's average P/S of 1.14.

Finally, investors will want to recognize that DVA has a P/CF ratio of 7.38. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. DVA's P/CF compares to its industry's average P/CF of 26.35. Over the past 52 weeks, DVA's P/CF has been as high as 14.30 and as low as 5.46, with a median of 7.38.

Value investors will likely look at more than just these metrics, but the above data helps show that DaVita HealthCare is likely undervalued currently. And when considering the strength of its earnings outlook, DVA sticks out at as one of the market's strongest value stocks.


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Zacks Investment Research