Are Investors Undervaluing DaVita HealthCare (DVA) Right Now?
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.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company value investors might notice is DaVita HealthCare (DVA). DVA is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock is trading with P/E ratio of 12.64 right now. For comparison, its industry sports an average P/E of 17.80. Over the past year, DVA's Forward P/E has been as high as 15.24 and as low as 9.37, with a median of 11.58.
DVA is also sporting a PEG ratio of 0.55. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DVA's industry currently sports an average PEG of 1.36. Over the last 12 months, DVA's PEG has been as high as 0.78 and as low as 0.42, with a median of 0.53.
Another valuation metric that we should highlight is DVA's P/B ratio of 2.64. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 4.22. Over the past year, DVA's P/B has been as high as 3.15 and as low as 1.77, with a median of 2.27.
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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. DVA has a P/S ratio of 0.8. This compares to its industry's average P/S of 1.
Finally, investors should note that DVA has a P/CF ratio of 10.28. 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. This stock's P/CF looks attractive against its industry's average P/CF of 28.09. Within the past 12 months, DVA's P/CF has been as high as 14.30 and as low as 6.61, with a median of 12.15.
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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