DaVita (DVA): Margin Decline Challenges Value Narratives as Shares Trade Below Fair Value

DaVita (DVA) reported earnings that are forecast to grow at 7.01% per year, with revenue expected to increase 4.3% annually. Both of these growth rates fall short of broader US market averages. The company’s net profit margin has slipped to 5.8%, down from 6.5% a year earlier, and over the last five years, its earnings have declined by 1.2% per year. Despite these pressures, DaVita’s high reported earnings quality and a share price of $118.75, which is well below the estimated fair value of $299.01, leave the stock trading at just 11 times earnings, much lower than both industry and peer averages. Investors may find DaVita attractively valued, but shrinking margins and a risky financial position underline why sentiment could stay mixed even as value signals appear positive.

See our full analysis for DaVita.

The real test is how these numbers stack up against the prevailing market narratives. Some views will get reinforced, while others may be challenged.

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International Push Shows Upside for Margins

• DaVita’s strategic international expansion, particularly in high-growth Latin American regions, is now supplementing U.S. operations and creates new opportunities for margin expansion beyond the domestic market’s slower pace.
• According to the analysts' consensus view, diversified revenue and ongoing cost management are expected to help mitigate risks tied to local volume swings, with:
  • Structural cost reductions and clinical innovation already improving efficiency and patient outcomes. These efforts support margin growth even in periods of flat or negative volume.
  • Disciplined acquisitions abroad are allowing DaVita to tap into markets with stronger volume growth. This helps balance out limited improvement in U.S. margins and provides a platform for future revenue upside.

Share Buybacks Drive EPS Upside

• Analysts expect DaVita’s share count to decline by 7.0% annually over the next three years. Alongside moderate profit growth, this reduction should lift earnings per share (EPS) faster than net income alone would suggest.
• Consensus narrative highlights that this buyback plan, if realized, supports the view that EPS could reach $13.77 by September 2028, even as overall revenue growth is forecast at a modest 4.3% per year.
  • The planned reduction in shares outstanding positions earnings growth ahead of topline trends. This suggests a durable floor for per-share profitability if operational risks are contained.
  • This dynamic is especially important given that the sector’s profit margins are facing compression. Per-share growth may still outpace operating gains.

Valuation Discount Remains Wide Versus Peers

• DaVita trades at just 11x price-to-earnings, far below the peer average of 31.4x and the US Healthcare industry average of 21.9x. This creates a considerable valuation gap for investors to consider.
• The analysts’ consensus view holds that, with a current share price of $118.75, the stock sits well below both the DCF fair value of $299.01 and the analyst price target of $147.13. This positions DaVita as a potential value play if long-term profit and cash flow guidance is achieved.
  • This undervaluation may reflect legitimate caution about financial risks and recent margin declines. Yet, the discount remains large enough that even a partial stabilization of operations could drive upward price revisions.
  • Investors are encouraged by analysts to cross-check these targets with their own assumptions, recognizing that DaVita’s pricing relative to fair value may reward patient holders if projected improvements materialize.
  See how the current valuation stacks up to the consensus outlook by reading the full narrative. 📊 Read the full DaVita Consensus Narrative.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for DaVita on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your DaVita research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

DaVita’s shrinking margins and declining earnings signal ongoing challenges with profitability and a financial profile that may not assure investors.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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