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Should Value Investors Buy DaVita HealthCare (DVA) Stock?

Zacks Equity Research
·3 min read

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One stock to keep an eye on is DaVita HealthCare (DVA). DVA is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 12.71. This compares to its industry's average Forward P/E of 20.97. Over the past 52 weeks, DVA's Forward P/E has been as high as 15.61 and as low as 9.37, with a median of 11.96.

Investors should also note that DVA holds a PEG ratio of 1.48. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DVA's industry has an average PEG of 1.59 right now. Within the past year, DVA's PEG has been as high as 1.53 and as low as 0.42, with a median of 0.56.

We should also highlight that DVA has a P/B ratio of 4.27. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. DVA's current P/B looks attractive when compared to its industry's average P/B of 6.39. Over the past 12 months, DVA's P/B has been as high as 4.89 and as low as 1.77, with a median of 3.77.

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 0.87. This compares to its industry's average P/S of 1.34.

These are only a few of the key metrics included in DaVita HealthCare's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, DVA looks like an impressive value stock at the moment.


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