Is Now An Opportune Moment To Examine DaVita Inc. (NYSE:DVA)?

Let's talk about the popular DaVita Inc. (NYSE:DVA). The company's shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$177 at one point, and dropping to the lows of US$140. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether DaVita's current trading price of US$140 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at DaVita’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for DaVita

What's The Opportunity In DaVita?

Good news, investors! DaVita is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that DaVita’s ratio of 11.99x is below its peer average of 24.68x, which indicates the stock is trading at a lower price compared to the Healthcare industry. Another thing to keep in mind is that DaVita’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of DaVita look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -10.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for DaVita. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although DVA is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to DVA, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on DVA for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about DaVita as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for DaVita (of which 1 can't be ignored!) you should know about.

If you are no longer interested in DaVita, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.