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Here's Why You Should Add DaVita (DVA) to Your Portfolio Now

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Zacks Equity Research
·4 min read
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DaVita, Inc. DVA is gaining on its Kidney Care segment and overseas growth.

The company, with a market capitalization of $13.15 billion, is a leading provider of dialysis services to the healthcare industry. The company’s earnings are expected to improve 18.3% over the next five years. Also, this currently Zacks Rank #1 (Strong Buy) company has a trailing four-quarter earnings surprise of 27.3%, on average.

Over the past three months, the stock has gained 35.5% compared with 14.4% growth of its industry.

Let’s delve deeper into the factors working in favor of the company.

DaVita Kidney Care: This is DaVita’s major revenue-generating segment, which specializes in a broad array of dialysis services, significantly contributing to its topline.

DaVita Kidney Care focuses on setting worldwide standards for clinical, social and operational practices in kidney care. It also provides support to nephrologist-led organizations like Nephrology Care Alliance (NCA) in their endeavor to treat patients with chronic kidney disease.

Through the third quarter of 2020, the company customized care for patients across the kidney care continuum using proprietary systems that it has been developing for years in partnership with the industry leaders. It is starting to see benefits from medical tools in the form of AI-driven models that personalize dosing for certain therapeutics, anticipate patients' clinical status and help avoid hospitalization, identify Chronic Kidney Disease (CKD) stage 4 patients who are likely to progress swiftly to End Stage Renal Disease (ESRD) and help avoid unplanned dialysis starts.

Acquisition of Dialysis Centers: Buyout of dialysis centers and businesses that own and operate dialysis centers as well as other ancillary services is DaVita’s preferred business strategy. This boosted the company’s top line to a large extent.

During the September quarter, DaVita opened a total of 17 new dialysis centers, acquiring five and closing eight in the United States. It also purchased 11 dialysis centers and opened one outside the United States.


 

Overseas Growth: DaVita is steadily expanding in the international markets. In the past few years, the company has strengthened its position in the emerging and developing markets of Brazil, China, Colombia, Germany, India, Malaysia, the Netherlands, Poland, Portugal and Saudi Arabia through strategic alliances as well as acquisitions of dialysis centers.

These are expected to help DaVita deliver more efficient patient care. Currently, DaVita is seeking to expand in major European and Asian countries via acquisitions and partnerships.

Estimate Trend

The company is witnessing a positive estimate revision for fiscal 2021 earnings. Over the past 60 days, the Zacks Consensus Estimate for the same has risen to $7.50 per share from $7.14.

The Zacks Consensus Estimate for fourth-quarter fiscal 2020 revenues is pegged at $2.94 billion, suggesting a 1.3% rise from the year-ago reported number.

Other Key Picks

Some other top-ranked stocks from the broader medical space are McKesson Corporation MCK, LabCorp LH and IDEXX Laboratories IDXX,each carrying a Zacks Rank #2 (Buy), presently. You can see the complete list of today’s Zacks #1 Rank stocks here.

McKesson has a projected long-term earnings growth rate of 6.6%.

LabCorp has a projected long-term earnings growth rate of 10.2%.

IDEXX has an estimated long-term earnings growth rate of 15.8%.

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DaVita Inc. (DVA) : Free Stock Analysis Report
 
McKesson Corporation (MCK) : Free Stock Analysis Report
 
Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report
 
IDEXX Laboratories, Inc. (IDXX) : Free Stock Analysis Report
 
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Zacks Investment Research