DaVita Stock Drops 5% Amid Regulatory Concerns Is There Opportunity Ahead in 2025

If you are standing at a crossroads with DaVita stock, you are not alone. Investors are weighing recent performance and trying to decide whether the company’s current share price is a bargain or a warning sign. DaVita closed at $131.16 most recently and, while the year-to-date return is sitting at -12.5%, in the longer term the story becomes more nuanced. Over the past three years, the stock has returned an impressive 50.5%, and nearly the same over five years. But in just the last 30 days, shares have slid nearly 5%, which is more evidence that perceptions of risk and growth potential are shifting as the market reacts to broader healthcare sector dynamics and regulatory speculation.

For anyone wondering if DaVita is undervalued, the company clocks in with a valuation score of 5 out of 6. This means it passes almost every typical valuation check that analysts use for spotting an underappreciated stock. With the share price moving this much in both directions and investors searching for stability, it makes sense to dig deeper into the numbers. Next, we will walk through the most common ways valuation is assessed and see exactly where DaVita stands. For those seeking an edge, stick around for a look at a less conventional but highly insightful valuation perspective that could make all the difference.

DaVita delivered -18.4% returns over the last year. See how this stacks up to the rest of the Healthcare industry.

Approach 1: DaVita Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company’s true value by projecting its future cash flows and discounting them back to today’s value using a required rate of return. The goal is to calculate what those future dollars are really worth right now, so investors can judge if the current share price represents a good deal.

For DaVita, the analysis starts with its latest reported Free Cash Flow (FCF) of $1.26 Billion. Analysts forecast somewhat of a dip in the near term, with projected FCF of $1.04 Billion in 2025. Beyond that, the model extends the projections for another decade, expecting a gradual recovery to around $1.31 Billion by 2035. While analyst estimates typically stretch only five years out, in this case, Simply Wall St has extrapolated further based on historical trends and sector assumptions.

After discounting all these projected cash flows back to the present, the estimated intrinsic value per share comes to $297.78. Compared to the current share price of $131.16, this suggests DaVita is trading at a 56.0% discount to its projected fair value. This may imply significant undervaluation based on the DCF model.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for DaVita.

Our Discounted Cash Flow (DCF) analysis suggests DaVita is undervalued by 56.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: DaVita Price vs Earnings

For profitable companies like DaVita, the Price-to-Earnings (PE) ratio is often the go-to metric for gauging valuation. It is straightforward: the PE compares a stock’s price to its per-share earnings. This allows investors to see how much they are paying for each dollar of current profit, making it especially useful when a company has consistent and reliable earnings.

What counts as a “normal” or fair PE ratio isn’t set in stone. It depends on factors like how quickly a company is expected to grow, the level of risk investors perceive, and how profit margins stack up. Higher expected growth and strong profitability usually justify a higher PE, while increased risk tends to push it down.

DaVita currently trades on an 11.2x PE ratio. This is significantly below the Healthcare industry average of 21.4x and well under the peer group’s 46.6x. On the surface, this could make DaVita look attractively cheap compared to its sector. But Simply Wall St’s “Fair Ratio” offers a more tailored perspective by factoring in DaVita’s unique growth outlook, industry, profit margins, market size and risks. The Fair Ratio for DaVita is set at 20.6x, which provides a more customized benchmark than a one-size-fits-all sector average.

This proprietary approach is more insightful than just comparing PE ratios, because it aligns expected returns with the company’s real prospects and circumstances. With DaVita’s actual PE ratio at 11.2x and the Fair Ratio at 20.6x, this suggests the stock is still undervalued based on this key metric alone.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your DaVita Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your perspective on DaVita’s future, where you combine your own expectations for revenue, profits, and margins into a story that guides a personal fair value estimate. This approach moves beyond just ratios and formulas. Narratives connect a company's business realities, such as clinical innovation or growth in international markets, to financial forecasts and ultimately your own fair value target, making the process much more intuitive and relevant. Unlike traditional spreadsheet analysis, Narratives on Simply Wall St’s Community page (used by millions) are interactive and simple to build, allowing anyone to test “what if” scenarios and instantly compare their own fair value to the latest share price to decide if they believe it is the right time to make an investment decision. Your Narrative also updates dynamically when new earnings or news are released, keeping you at the forefront of market changes. For example, some DaVita investors now see strong margin growth and international expansion driving a fair value as high as $186, while others focus on operational risks and set a more cautious target of $137, all based on the same key facts but different outlooks.

Do you think there's more to the story for DaVita? Create your own Narrative to let the Community know!

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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