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Should Value Investors Buy DaVita HealthCare (DVA) Stock?

Zacks Equity Research

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.

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.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is DaVita HealthCare (DVA). DVA is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 13.32 right now. For comparison, its industry sports an average P/E of 21.91. Over the last 12 months, DVA's Forward P/E has been as high as 14.50 and as low as 9.37, with a median of 11.70.

Investors will also notice that DVA has a PEG ratio of 0.58. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. DVA's industry has an average PEG of 1.66 right now. Over the past 52 weeks, DVA's PEG has been as high as 0.75 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 4.73. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 6.39. Within the past 52 weeks, DVA's P/B has been as high as 4.79 and as low as 1.77, with a median of 2.32.

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 0.85. This compares to its industry's average P/S of 1.3.

Finally, we should also recognize that DVA has a P/CF ratio of 10.90. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 32.31. Over the past 52 weeks, DVA's P/CF has been as high as 14.30 and as low as 6.84, with a median of 12.15.

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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