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Is DaVita Inc. (NYSE:DVA) Potentially Undervalued?

Simply Wall St
·3 mins read

While DaVita Inc. (NYSE:DVA) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at DaVita’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for DaVita

What is DaVita worth?

Good news, investors! DaVita is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $129.69, but it is currently trading at US$83.90 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because DaVita’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will DaVita generate?

earnings-and-revenue-growth
earnings-and-revenue-growth

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of DaVita, it is expected to deliver a relatively unexciting earnings growth of 9.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since DVA is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on DVA for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DVA. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

So while earnings quality is important, it's equally important to consider the risks facing DaVita at this point in time. At Simply Wall St, we found 2 warning signs for DaVita and we think they deserve your attention.

If you are no longer interested in DaVita, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.