Is DaVita More Attractive After This Week’s 4% Stock Surge?

• If you have been wondering whether DaVita is undervalued or just misunderstood, you are in the right place. Let us unpack what the numbers (and the story) really say.
• DaVita's stock has been on a rollercoaster: up 4.3% this week, down 7.3% in the past month, and has fallen 19.8% year-to-date. It is still 62.9% higher over three years.
• Recent headlines have highlighted heightened attention in the kidney care sector, as mergers and evolving healthcare policies draw a spotlight to dialysis providers like DaVita. These developments help explain the swings in risk appetite and why DaVita's share price has been anything but steady.
• When it comes to valuation, DaVita earns a 6 out of 6 score for being undervalued across all our main checks. Stick around as we break down the valuation approaches and hint at an even more insightful way to gauge true value that you will not want to miss at the end.

Find out why DaVita's -27.5% return over the last year is lagging behind its peers.

Approach 1: DaVita Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's value by projecting future cash flows and discounting them back to today's dollars. This method helps investors determine whether a stock is trading at a price above or below its true value.

For DaVita, the DCF model begins with the latest twelve months' Free Cash Flow of $1.28 Billion. While analysts typically offer forecasts up to five years ahead, further cash flow projections up to 2035 are extrapolated using Simply Wall St's methodology. These projections anticipate only modest growth, with free cash flow estimated at $1.52 Billion by 2035.

All future cash flows are discounted back to present value and summed to reach a fair value of $346.56 per share. This calculation suggests DaVita is trading at a 65.3% discount to its intrinsic value based on current forecasts.

In short, the model concludes DaVita's share price is significantly below where fair value would suggest.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests DaVita is undervalued by 65.3%. Track this in your watchlist or portfolio, or discover 927 more undervalued stocks based on cash flows.

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

Approach 2: DaVita Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular valuation tool for profitable companies like DaVita because it directly measures how much investors are paying for each dollar of earnings. A lower PE can signal an undervalued stock, while a higher PE may indicate high growth expectations or perceived safety.

Growth expectations and risk play a major role in what constitutes a “normal” or “fair” PE ratio. Companies that are expected to grow quickly or have more stable earnings often justify higher PE ratios. In contrast, slower-growing or riskier businesses usually trade at lower multiples.

Currently, DaVita trades at a PE ratio of 11x. This is substantially below both the peer average of 37x and the healthcare industry average of 23x, suggesting DaVita is priced conservatively compared to peers.

Simply Wall St’s proprietary “Fair Ratio” for DaVita is 21x. This metric goes beyond simple benchmarks by factoring in the company’s specific growth rate, profit margin, risks, market capitalization, and position within its industry. In doing so, the Fair Ratio provides a more comprehensive estimate of what DaVita’s multiple should be, rather than relying solely on broad industry or peer numbers that may not truly reflect the business’s outlook or risk profile.

Comparing DaVita’s current PE of 11x to the Fair Ratio of 21x shows that the stock appears significantly undervalued using this approach.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1433 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 us introduce you to Narratives. Narratives are the backbone of smarter investing because they allow you to connect your story or perspective on DaVita directly to financial forecasts and fair value estimates.

Instead of relying on a single set of numbers or static models, Narratives let you easily input your own expectations for key figures like future revenue, earnings, and profit margins, all in a friendly and intuitive format. On Simply Wall St’s Community page, which is used by millions, anyone can quickly create or explore Narratives, making it accessible to new and experienced investors alike.

Narratives show at a glance how your view of DaVita’s business and the latest news translates into a custom fair value, which is automatically compared to today’s share price so you can more confidently decide when to buy or sell. Because Narratives update dynamically as soon as new information from earnings, policy, or company developments is released, your analysis stays both relevant and timely.

For example, some investors currently see DaVita’s fair value as high as $186, reflecting confidence in steady growth and resilient margins, while others are more cautious and estimate a fair value closer to $137 due to policy headwinds. This shows just how powerful Narratives are in capturing multiple perspectives.

Do you think there's more to the story for DaVita? Head over to our Community to see what others are saying!

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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