Is DaVita Inc. (DVA) a Good Buy for Value Investors?

Alex Hamilton  |

Value investors looking for a good buy may be considering adding DaVita Inc. (DVA) to their portfolios. But is this stock a good buy, or should you be looking elsewhere? There are several key metrics as well as recent news developments to consider.

One of the most important metrics to look at is PE ratio, or Price to Earnings ratio. PE is an indication of how much investors are willing to pay for each dollar of earnings. When considering DVA, we must compare the current PE to where the ratio has been in the past, how it compares to industry average, and how it compares to the overall market.

DVA has a trailing 12 months PE ratio of 18.3. The stock compares favorably to the market as a whole and the industry, which sit at 20.2 and 22.1 respectively. The PE is slightly lower than the midpoint over the past five years.

Another metric to consider is Price/Sales ratio, or P/S ratio, which compares a stock’s price to its total sales. DVA has a P/S ratio of 1.1, which is lower than the S&P 500 average. The lower the reading, the better.

Going off of PE and P/S ratios, DVA appears to be a good buy for value investors. But there are other factors that need to be considered before buying any stock.

Recent earnings estimates have been disappointing, and full year estimates have been following the same trend.

But Wall Street analysts have suggested a rating of 2 for the stock, which signifies a buy.

DaVita Inc. was also recently hit with a $383.5 million jury verdict in a wrongful death case. Families of three patients filed the lawsuit. The patients suffered cardiac arrest and died after receiving dialysis treatments at DaVita clinics. Patients were treated with GranuFlo, a product that the company knew could cause alkalosis and toxic pH imbalances.

The plaintiffs accused DaVita of ignoring “red flags that preceded the loss of life of these patients and many others.”

Bad news aside, it’s hard to beat DVA’s impressive metrics and strong industry rank, which supports the growth potential of the stock. Still, there are some concerns that need to be considered, and it’s important to take a serious look at the company's growth potential as well as the effects of the recent lawsuit. Value investors may want to wait for more estimates and consider analyst sentiment before taking the dive.

Stock price data is provided by IEX Cloud on a 15-minute delayed basis. Chart price data is provided by TradingView on a 15-minute delayed basis.

DISCLOSURE: The author has no stake in the listed equities


The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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