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Are Investors Undervaluing DaVita HealthCare (DVA) Right Now?

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  • DVA

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 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.

One company value investors might notice is DaVita HealthCare (DVA). DVA is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 13.06, which compares to its industry's average of 31.32. DVA's Forward P/E has been as high as 14.99 and as low as 11.30, with a median of 12.91, all within the past year.

Investors should also note that DVA holds a PEG ratio of 0.91. 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 1.27. DVA's PEG has been as high as 1.50 and as low as 0.66, with a median of 0.90, all within the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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 1.21. This compares to its industry's average P/S of 1.87.

Finally, our model also underscores that DVA has a P/CF ratio of 9.92. 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 29.83. Over the past 52 weeks, DVA's P/CF has been as high as 10.31 and as low as 6.95, with a median of 9.12.

These are just a handful of the figures considered in DaVita HealthCare's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that DVA is an impressive value stock right now.

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